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LIBRARY 


MARKET  ANALYSIS 


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MARKET  ANALYSIS 

ITS   PRINCIPLES   AND   METHODS 


BY 

PERCIVAL  WHITE,  A.M. 

Market  Counselor;  Member  Society  of  Industrial  Engineersi 

American  Society  of  Mechanical  Engineers;  Society 

of  Automotive  Engineers;    Institution 

of  Automobile  Engineers 


First  Edition 


McGRAW-HILL  BOOK  COMPANY,  Inc. 

NEW  YORK:    370   SEVENTH  AVENUE 
LONDON:  6  <fe  8  BOUVERIE  ST..  E.  C.  4 

1921 


1 4  7  0 1 8 


Copyright,  1921,  by  the 
McGbaw-Hill  Book  Company,  Inc. 


W  5  ^  ^ 


TO 

Walter  #♦  Ha^toarlt 

ITS   CO-AUTHOR 
THIS  BOOK  IS  DEDICATED 


PREFACE 


The  purpose  of  this  book  is  to  serve  as  a  guide  for  the  manu- 
facturer, sales  manager,  engineer,  advertising  agency,  and  others 
interested  in  the  scientific  analysis  and  organization  of  markets. 
Although  addressed  primarily  to  business  executives,  it  is  hoped 
o     that  the  book  also  will  prove  of  value  to  the  professional  market 
C5     surveyor,  as  well   as   to   the   student  who  beheves  that,  in  the 
coming  business  era,  scientific  methods  will  be  applied  to  dis- 
rT      tribution  as  they  were  to  production  in  the  past  era. 

Although  an  attempt  has  been  made  to  give  the  somewhat 
;       casual  reader  an  adequate  perspective  of  market  analysis,  the  book 
f;       is  arranged  so  as  to  give  the  actual  investigator  all  instructions 
p.      necessary  to  the  conduct  of  his  work. 

^  At  the  beginning  of  each  chapter  an  outHne  is  given  of  its  con- 

^>  tent.  This  outHne  is  in  question  form.  It  is,  of  course,  impos- 
sible to  devise  a  set  of  questions  directly  applicable  to  any  and 
P-  every  business,  yet  it  will  be  safe  for  the  surveyor  to  assume  that 
Q  by  the  time  he  is  able  to  give  intelligent  answers  to  these  key 
questions  he  has  in  hand  all  the  material  necessary  for  a  complete 
report  on  his  market.  The  chapters  and,  in  so  far  as  possible,  the 
headings  under  each  chapter,  have  been  arranged  according  to 
the  surveyor's  logical  course  of  procedure,  rather  than  with  any 
attempt  at  a  theoretical  or  merely  pedagogical  presentation  of  the 
subject. 

In  addition  to  those  mentioned  in  the  text,  grateful  ac- 
knowledgment is  made  to  the  following  gentlemen  for  their  assist- 
ance: 

Charles  F.  Pietsch,  of  Frank  Seaman,  Inc.,  Earl  C.  Norris  of 
Street  &  Finney,  WilUam  ElUot  of  Packard  Motor  Car  Co.  of  New 
York,  Professor  Frederick  B.  Robinson,  Dean  of  the  School  of 
Business  and  Civic  Administration  of  the  College  of  the  City  of 
New  York,  J.  B.  Keeney,  of  the  Editor  and  Publisher,  E.  O, 

yU 


\'iii  PREFACE 

Savryev,  Jr.  of  the  Fishing  Gazette,  John  Willy  of  the  TioUsi 
Monthly,  M.  L.  Tyler  of  the  McCall  Company,  A.  H.  Melville,  of 
the  Nast  Pubhcations,  L.  J.  Epply  of  the  Hammermill  Paper  Co., 
L.  D.  GatUn,  of  the  E.  C.  GatUn  Co.,  W.  J.  Damm  of  the  Mil- 
waukee Journal,  Frank  T.  Carroll  of  the  Indianapolis  News, 
Frank  D.  Webb  of  the  Baltimore  News,  S.  W.  Page  of  the  George 
Batten  Advertising  Agency,  R.  E.  Carpenter  of  Hartford  Auto- 
motive Parts  Co.,  F.  J.  Arkins  of  the  Alexander  Hamilton  Institute, 
Willard  Fuller,  Industrial  Engineer,  Theodore  B.  Damm  of  the 
Joseph  Richards  Adv.  Agency,  George  H.  Griffiths,  of  the  Hard- 
ware Age,  Robert  C.  Powell,  of  the  Tracy-Parry  Co.,  Arthur  A. 
Pole  of  Hearst's  Magazine,  N.  P.  Winchell,  Jr.,  of  Paper,  H.  L. 
Potter  of  American  Lumberman,  H.  S.  Brutton  of  Proctor  & 
Gamble  Co.,  H.  A.  McKee  of  the  Library  Bureau,  Raymond 
Welch  of  the  Crowell  Pubhshing  Co. 

Thanks  are  also  due  to  Mr.  Charles  G.  Wheeler,  for  invalu- 
able assistance  in  proof  reading. 

As  it  is  the  author's  intent  to  keep  this  book  up-to-date,  he 
would  appreciate  suggestions  from  readers  calculated  to  be  of 
assistance  in  making  revisions. 

Percival  White. 

Boston,  Mass. 
September  1,  1921. 


CONTENTS 


PAGE 

I.  How  Market  Surveys  are  Made 1 

II.  Methods  of  Securing  Data 13 

III.  Assembling  and  Analyzing  Data 43 

IV.  Presenting  the  Data 64 

V.  Organizing  the  Market  Survey 81 

VI.  Determining  the  Problem 95 

VII.  The  Preliminary  Analysis 103 

VIII.  The  Product  to  be  Marketed 115 

IX.  The  Company 143 

X.  The  Industry  in  General ; 159 

XI.  Competition 173 

XII.  The  Company's  Customers 190 

XIII.  The  Ultimate  Consumer 205 

XIV.  The  Nature  and  Size  of  the  Market 222 

XV.  Potentialities  and  Limitations  of  the  Market 240 

XVI.  Distribution 258 

XVII.  Sales  and  Advertising 272 

XVIII.  Foreign  Markets 289 

XIX.  Applying  the  Market  Survey  to  Business 309 

Bibliography 329 

Index 331 


l^ 


MARKET  ANALYSIS 


CHAPTER  I 
HOW  MARKET   SURVEYS  ARE  MADE 

Every  business  is  concerned  chiefly  with  two  things:  First 
with  producing  a  commodity,  and,  second,  with  marketing  it. 
This  book  aims  to  describe  the  latter  function. 

Originally,  a  market  was  the  actual  place  where  the  exchange 
of  one  commodity  for  another  took  place.  Since  at  that  time 
there  was  no  money,  trading  was  done  by  a  system  of  barter,  by 
which  the  superfluous  commodities  of  one  man  were  exchanged 
for  those  of  his  neighbor. 

Although  markets  have  changed  greatly  in  outward  semblance 
since  then,  the  fundamentals  remain  unaltered.  A  market  is  still 
nothing  more  nor  less  than  an  opportunity  to  buy  or  sell.  The 
great  difference  lies  in  the  methods  of  locating  the  market,  supply- 
ing it  with  commodities,  and  securing  payment  for  them.  Mar- 
kets have  ceased  to  be  local  assemblies  or  fairs  held  at  some 
crossroads  or  other  central  location.  A  modern  market  is  limited 
in  scope  only  by  the  number  of  possible  users  of  the  product 
throughout  the  world.  The  introduction  of  money,  improve- 
ments in  transportation,  the  rise  of  manufacturing,  and  many 
other  factors  have  tended  to  specialize  and  complicate  the 
original  simplicity  of  the  marketing  function. 

A  market  may  be  compared  to  a  sponge,  which  absorbs  the 
output  of  the  business.  It  is  necessary  to  determine  how  much 
this  sponge  will  absorb,  how  fast  it  will  absorb  it,  and  many 
other  facts,  before  it  is  possible  to  understand  and  reckon  intelli- 
gently with  the  possibilities  and  limitations  of  that  market. 

Markets  are  Measurable.  Markets  do  not  happen.  They 
follow  and  are  governed  by  certain  economic  laws.     That  we  are 


2  MARKET  ANALYSIS 

unable  to  solve  marketing  problems  more  accurately  and  readily 
is  not  due  to  any  irrogularit>'  in  tho  nature  of  the  markets  them- 
selves, but  rather  to  our  ignorance  of  the  facts  which  bear  upon 
the  situation.  If  we  were  in  possession  of  all  the  data,  it  is  safe 
to  say  that  markets  woukl  be  as  measurable,  as  certain,  and  as 
determinable  as  any  other  ))hcnonienon  which  obeys  fixed  laws. 
Markets  are  real,  tangible,  definite  things.  They  may  be  plotted 
and  charted  and  mapped  and  reckoned  with  just  as  accurately 
as  our  knowledge  of  the  facts  will  allow. 

We  are  inclined  to  look  upon  marketing  problems  today  as 
we  looked  upon  production  problems  ten  years  ago.  Manufac- 
turing in  those  days  was  more  or  less  subservient  to  accident. 
It  happened.  Schedules,  planning  departments,  routing,  and 
the  other  outgrowths  of  modern  production  were  as  unknown 
then  as  is  market  analysis  today. 

It  seems  indisputable  that  the  markets  of  the  future  are  to 
be  won  Only  through  the  application  of  the  same  scientific  methods 
which  were  so  successful  in  the  field  of  production.  It  is  probable 
that  markets  may  be  sought  for  so  eagerly,  as  a  result  of  this 
competition,  that  they  will  be  available  only  to  those  who  apply 
scientific  methods  most  intensively. 

The  application  of  science  to  markets  depends  not  upon 
guesswork,  nor  even  upon  a  qualitative  analysis  of  conditions, 
but  rather  upon  a  comprehensive  understanding  of  industry  in 
general,  of  the  special  line  of  business  in  particular,  and  of  a 
quantitative  analysis  of  all  the  facts  involved. 

It  should  be  understood  at  the  beginning  that  it  is  impossible 
to  apply  the  methods  of  pure  science  to  analyzing  markets.  A 
scientific  man  with  no  practical  business  experience  is  not  weU 
qualified.  The  only  feasible  program  is  to  link  the  methods  of  the 
scientist  with  those  of  the  experienced  business  man,  and  to  apply 
the  horse  sense  which  is  the  keenest  weapon  of  them  both. 

What  is  Market  Analysis?  Market  analysis  is  the  application 
of  scientific  principles  and  methods  to  problems  connected  with 
the  nature,  extent,  and  peculiarities  of  the  market,  together  with 
the  means  for  bringing  the  product  to  the  market  and  distributing 
it  there. 

Every  science  is  built  upon  facts.  Therefore,  the  first  step 
in  the  application  of  science  to  markets  is  to  reveal  all  the  perti- 


HOW  MARKET  SURVEYS  ARE  MADE  3 

nent  facts  possible  to  obtain.  First,  the  market  survey  must  get 
these  facts,  second,  it  must  analyze  and  interpret  them,  and, 
third,  it  must  show  how  the  conclusions  reached  may  be  applied 
to  the  particular  business  in  question. 

It  has  been  said  in  regard  to  all  commercial  research  work  that 
the  man  is  more  important  than  the  method.  To  a  great  extent 
this  is  true.  It  is  very  largely  in  the  hands  of  the  man  in  charge 
of  the  actual  research  work  to  make  or  mar  the  results  of  the  inves- 
tigation. Although  the  fundamental  principles  underlying  every 
market  investigation  are  the  same,  the  individual  problem  demands 
individual  treatment.  Ordinarily,  this  requires  a  man  of  scien- 
tific training  and  habits,  who  has,  in  addition,  a  thorough  grasp 
of  business  principles. 

The  success  of  a  market  analysis  depends  upon  both  the  man 
and  the  method,  the  one  supplementing  the  other.  The  man 
supplies  by  judgment  and  experience  the  place  of  insufficient  or 
confusing  data.  The  method  serves  to  put  in  order  and  to 
collate  the  steps  in  the  procedure. 

What  a  Market  Survey  Does.  The  opportunity  for  profit 
obtainable  from  a  well-executed  market  survey  will  depend  upon 
the  specific  nature  of  the  problem  in  hand,  the  readiness  of  the 
management  to  accept  and  to  act  upon  its  conclusions,  and  upon 
other  considerations  treated  at  length  in  later  chapters.  Any 
market  survey,  however,  will  serve  to  bring  to  light  certain  data 
fundamental  to  any  thorough  understanding  of  the  market. 
These  may  be  called  the  general  results  of  market  analysis,  and 
may  be  classified  as  f oUows : 

1.  A  market  survey  should  lead  to  a  better  understanding  of 
present  markets,  through  an  analysis  of  the  actual  consumers, 
their  location,  numerical  strength,  purchasing  power,  buying 
motives,  and  hkes  and  dishkes. 

2.  The  discovery  of  unexploited  markets  is  one  of  the  most 
frequent  results  of  market  analysis.  It  not  only  determines 
the  location  of  these  untouched  territories,  but  analyzes  their 
possibiHties  and  limitations. 

3.  A  market  survey  will  not  only  delineate  the  actual  and 
potential  market  for  the  product  itself,  but  also  for  any  by-product 
of  the  industry. 

Aside  from  these  general  results,  there  are  a  number  of  specific 


4  MARKET  ANALYSIS 

results,  involving  a  change  in  the  method  of  approach  to  the 
market  or  a  change  in  the  product  offered  to  the  market,  for 
example : 

1.  Since  the  sales  department  is  most  vitally  interested  in  the 
actual  marketing  problem,  it  is  but  natural  that  many  findings 
should  directly  affect  the  present  sales  program. 

2.  The  same  considerations  apply  to  the  advertising  depart- 
ment, which  is  wholly  a  marketing  function. 

3.  It  is  possible  that  the  market  survey  might  point  to  a  change 
in  the  product  itself,  in  order  to  make  it  more  suited  to  market 
requirements. 

4.  A  market  survey  may  result  in  the  more  accurate  corre- 
lation of  purchasing  with  production  and  sales.  It  may  serve  to 
show  why  seasonal  demand  can  be  eliminated  or  made  a  much  less 
important  factor. 

5.  A  market  survey  may  make  clear  to  the  minds  of  the 
executives  the  importance  of  changing  the  distributive  system 
in  vogue. 

The  above  are  merely  suggestive  of  results  which  might  be 
obtained.  It  does  not  follow  that  a  market  survey  will  necessarily 
upset  the  estabhshed  order  of  things.  Quite  the  contrary.  It 
may  merely  point  out  ways  and  means  by  which  present  practices 
may  be  bettered  in  so  far  as  they  affect  the  marketing  function. 

The  Steps  in  the  Procedure.  Every  market  investigator  will 
find  that  there  are  certain  methods  of  procedure  common  to 
every  investigation.  Before  embarking  on  his  individual  pro- 
gram, he  should  find  time  to  study  the  broad  aspects  of  the  situa- 
tion. The  first  move  is  to  obtain  a  general  perspective  of  the 
entire  problem.  The  advantage  of  this  lies  in  the  opportunity 
it  affords  him  to  block  out  clearly  the  subsequent  procedure. 

There  has  been  a  tendency,  particularly  in  research  depart- 
ments maintained  by  private  companies,  to  do  each  day's  task 
as  it  presents  itself,  rather  than  to  plot  out  the  entire  program 
and  to  work  on  a  definite  schedule.  This  day-to-day  policy  often 
proves  to  be  a  hopeless  undertaking,  chiefly  because  it  almost 
always  appears  that  the  more  one  investigates,  the  more  investi- 
gating remains  to  be  done.  The  only  logical  course  for  a  com- 
pany desiring  to  try  out  market  analysis  on  a  small  scale  is  to 
decide  in  advance  how  much  time  and  money  may  be  allotted 


HOW  MARKET  SURVEYS  ARE  MADE  5 

for  this  trial,  and  then  keep  to  this  schedule  from  the  outset  as 
far  as  possible. 

Although  market  survey  work  is  divisible  into  a  fairly  definite 
number  of  operations,  these  vary  somewhat  with  the  nature  of 
the  subject  under  investigation.  There  is  also  a  certain  tendency 
among  them  to  overlap.  The  Une  of  demarcation  becomes  blurred. 
It  is  almost  impossible  to  complete  one  operation  before  beginning 
the  next.  For  instance,  in  collecting  information,  particularly 
in  the  preliminary  investigation,  it  will  be  found  that  data  rela- 
tive to  the  company,  its  product,  competition,  customers,  etc., 
will  be  so  intermingled  as  to  form  a  baffling  medley  of  information. 
Before  this  can  be  put  to  use,  it  must  be  classified  under  the 
respective  headings  as  determined  in  the  original  scheme. 

Determining  the  Problem.  What  is  the  precise  objective  of 
this  market  analysis?  What  results  do  we  wish  to  accomplish? 
What  particular  phases  of  the  market  are  we  to  study?  What 
restrictions  are  t*here  on  our  plan  of  action  or  our  method  of  attack? 
To  answer  these  questions  is  the  first  consideration  in  every  mar- 
ket survey. 

The  main  difference  between  the  scientific  examination  of 
the  marketing  problem  made  by  the  surveyor  and  the  shrewd 
analysis  made  by  the  veteran  salesman  is  mainly  a  matter  of 
accuracy.  The  salesman  bases  his  opinion  upon  a  species  of 
intuition,  born  of  long  experience.  The  surveyor,  who  attempts 
to  analyze  markets  scientifically,  must  regard  his  intuition  as  of 
secondary  importance  and  base  his  judgment  on  facts. 

The  man  who  is  commissioned  to  make  a  market  survey  for  a 
company  may  find  himself  adrift  without  any  definite  instruc- 
tions. His  first  task,  accordingly,  is  one  of  definition.  If  this 
company  and  this  market  are  different  from  other  companies  and 
other  markets,  wherein  does  the  difference  lie?  What  are  the 
peculiarities  of  this  business?  What  are  the  problems  the  com- 
pany's executives  consider  paramount,  and  are  these  really  the 
vital  ones? 

Often  the  precise  determination  of  the  problem  in  hand  is 
among  the  most  difficult  of  any  of  the  steps  to  be  taken.  In  this 
part  of  the  work,  especially,  the  investigator  will  need  to  call 
upon  his  associates  and  superiors  for  assistance  and  advice.  In 
all  probability,  the  surveyor  will  find  himself  confronted  with  the 


6  MARKET  A^fALYSIS 

ver>'  obstacles  which  the  company's  executives  have  been  strug- 
gUng  against  for  years,  and  he  will  find  it  necessary  to  face  these 
issues  squarely  and  boldly. 

The  surveyor  may  not  always  be  successful.  In  one  case,  a 
market  analysis  was  made  of  a  certain  chip  soap.  An  examination 
of  the  findings  indicated  that,  under  conditions  then  existing,  it 
was  higlily  desirable  to  market  this  product  through  retailers 
dealing  in  household  washing  machines.  However,  owing  to 
the  prejudice  of  the  company's  oflficials,  this  proposition  was 
considered  too  radical  a  departure  from  the  ordinary,  consequently 
it  remained  for  a  more  enterprising  concern  to  take  advantage  of 
the  opportunity.  Here,  the  surveyor's  findings  were  successful, 
but  his  work  was  not  profitable,  because  it  was  not  utilized. 

The  surveyor  should  begin  his  work  with  a  realization  that, 
whatever  business  is  being  investigated,  its  field  is  not  God-given, 
nor  is  it  basically  different  from  thousands  of  others.  He  should 
not  hesitate  to  see  the  facts  as  they  are,  and  to  record  what  he  finds. 
If  the  company's  officials  do  not  want  the  truth,  they  have  no 
need  for  a  market  survey. 

The  Preliminary  Analysis.  In  addition  to  noting  preliminary 
impressions,  it  is  often  desirable  for  the  investigator  to  make  in 
written  form  a  proposal  setting  forth  exactly  what  the  survey 
is  to  cover,  what  the  general  plan  of  action  is,  how  much  time  it 
will  take,  what  it  will  cost,  etc.  It  is  a  wise  rule  to  keep  a  record 
of  daily  progress — cormnonly  known  as  a  "progress  report" — and 
to  have  this  where  it  may  be  referred  to  readily.  Written 
notes  act  as  a  ratchet.  They  prevent  slipping  backward.  Fur- 
thermore, they  enable  the  surveyor  to  present  to  his  superiors 
incontrovertible  evidence  of  his  plan  of  action,  and  of  its  progress. 

When  the  proposal,  or  preliminary  analysis,  is  completed,  it 
may  be  taken  up  with  the  company's  officials  for  discussion, 
modification,  and  approval.  This  will  have  two  definite  results: 
First,  it  will  give  the  company's  executives,  who  are  most  vitally 
concerned,  an  opportunity  to  see  what  progress  is  being  made, 
and  to  offer  criticisms  and  suggestions.  Second,  after  hearing 
what  criticisms  are  made  on  the  preliminary  report,  the  surveyor 
has  a  definite  program  upon  which  to  work. 

This  proposal  cannot  be  expected  to  outline  the  procedure 
or  the  results  except  in  a  general  and,  perhaps,  somewhat  vague 


HOW  MARKET  SURVEYS  ARE  MADE  7 

manner.  The  outcome  is  bound  to  depend  upon  facts  which 
will  not  appear  until  the  market  survey  is  well  under  way.  It  is 
dangerous  to  promise  too  much  in  advance.  For  example,  one 
ambitious  research  speciahst  thought  he  had  discovered  how  to 
predict  mathematically  the  potentialities  of  foreign  markets  for 
motor  cars.  He  agreed  to  work  out  a  formula,  the  factors  of 
which  were  the  wealth  per  capita  and  the  number  of  inhabitants 
per  mile  of  road.  The  elements  of  error,  however,  and  the 
diversity  of  local  conditions,  were  so  great  that  the  surveyor's 
promise  had  to  be  retracted. 

Obviously,  the  investigator's  first  impressions  must  not  be 
taken  too  seriously.  They  admittedly  will  be  open  to  the  very 
objections  to  which  the  intuitive  judgments  of  the  veteran  sales- 
man are  open.  It  is  to  be  expected  that  these  preliminary  find- 
ings must  be  carefully  revised  in  the  light  of  evidence  later 
obtained. 

Enough  time  should  be  allowed  to  make  the  preliminary  study 
fairly  thorough.  It  seems  to  be  the  consensus  of  the  best  opinion 
that  the  creative  work  should  be  done  as  near  the  outset  as  pos- 
sible. Any  method  which  postpones  it  until  after  a  long  siege 
with  statistics  and  details  courts  failure. 

Planning  the  Campaign.  After  making  a  preliminary  diag- 
nosis, it  is  necessary  to  get  down  to  a  thorough,  plodding,  intensive 
study  of  the  various  phenomena  involved.  Much  of  the  creative 
work  now  will  have  been  accompUshed,  but  a  great  deal  of 
routine  work  still  will  remain.  This  will  be  of  the  scientific, 
laboratory  sort,  which  cannot  be  slighted  or  guessed  at,  and 
which  takes  time  and  pains.  Every  finding  and  premise  must 
be  scrutinized  with  a  view  to  deciding  upon  its  accuracy  and 
adequacy.  Predetermined  ideas  must  be  challenged,  wherever 
there  is  the  least  possibility  of  error. 

The  situation  is  somewhat  Hke  that  of  the  lawyer  who  has 
investigated  his  case,  found  the  criminal,  made  sure  of  his  guilt, 
and  haled  him  into  court.  But  he  is  still  confronted  with  the  very 
definite  problem  of  obtaining  proof  of  his  guilt.  Mere  circum- 
stantial evidence  and  hypothetical  deductions  will  not  pass 
muster.  He  must  establish  his  facts.  He  must  prove  what  he 
says. 

At  this  juncture  the  surveyor  should  decide  what  informa- 


8  MARKET  ANALYSIS 

tion  to  obtain.  The  entire  program  for  gathering  this  informa- 
tion should  be  mapped  out  in  advance.  What  are  we  to  find  out? 
To  what  sources  are  we  to  apply?  What  methods  shall  we  use 
for  tapping  them?  How  extensive  a  study  will  be  necessary  to 
give  an  unassailable  preponderance  of  facts  or  opinions?  What 
j)eople  shall  we  need  to  interview  in  person  and  how  many  can  be 
reached  by  letter?  How  much  traveUng  must  be  done?  What 
books  must  be  consulted?  W^hat  other  similar  investigations 
have  been  made  which  can  contribute  facts  or  figures? 

The  Company  and  Its  Product.  Invariably,  the  engineering 
approach  to  any  market  must  be  made  through  a  study  of  the 
merchandise  itself.  In  the  last  analysis,  it  is  the  product  which 
determines  the  company's  success.  Not  the  best  production 
methods,  the  best  purchasing  program,  nor  the  most  convincing 
salesman  in  the  district  can  make  a  company  prosperous  if  its 
product  is  not  satisfactoiy.  The  man  or  woman  who  actually 
makes  use  of  the  product  is  going  to  judge  it  on  its  intrinsic  merits. 

Fortunately,  the  product  is  the  easiest  and  most  tangible 
subject  for  study.  A  great  part  of  the  market  survey  will  be 
devoted  fo  analyzing  character,  scope,  and  extent,  etc.,  of  the 
need,  which  must  of  necessity  exist  for  every  merchantable  com- 
modity. The  survey  will  analyze  past  history  as  a  means  of 
shedding  further  Hght  upon  the  future.  It  will  examine  the 
actual  construction  of  the  product,  the  way  it  operates,  what  it 
costs,  what  its  advantages  are,  what  shortcomings  it  has,  what 
materials  enter  into  its  construction  or  composition,  etc. 

The  surveyor  goes  even  farther  and  studies  the  organization 
which  produces  the  goods,  its  facilities  for  keeping  up  quality 
and  keeping  down  cost,  its  ability  to  produce  in  quantity,  its 
method  of  distributing  and  selling,  and  its  personnel. 

The  Industry  in  General.  The  survey  must  include  a  study 
of  the  industrj'  in  general  as  well  as  of  the  company  and  its 
product.  To  express  it  in  another  way,  the  problem  must  be 
examined  from  without  as  well  as  from  within.  Whereas  the 
study  of  the  company  and  its  product  usually  may  be  approached 
rapidly,  and  with  fairly  certain  results,  the  study  of  the  industry 
in  general  probably  will  prove  more  devious.  Nevertheless, 
many  data  may  be  collected  without  undue  difficulty  or  expense, 
partly   through   bibliographical   work,    and   partly   through   the 


HOW  MARKET  SURVEYS  ARE  MADE  9 

examination  of  advertising  matter  appearing  in  magazines  and 
elsewhere,  through  catalogues,  government  publications,  etc. 

The  history  and  development  of  the  industry  should  be  care- 
fully examined,  and  an  attempt  made  to  orient  it  with  respect 
to  the  industrial  activity  of  the  entire  country.  This  is  all  done 
for  the  purpose  of  ascertaining  the  exact  place  of  the  company 
in  the  industry.  By  comparing  the  relative  growth  of  the  company 
and  the  industry,  it  is  easy  to  determine  whether  the  company  is 
expanding  proportionately  to  the  industry.  A  comparison  may 
be  made  of  the  total  volume  of  the  goods  in  question  as  contrasted 
with  those  which  the  company  itself  manufactures,  showing  the 
amount  of  business  the  company  is  obtaining.  Some  attention 
may  well  be  given  to  its  relation  to  foreign  business.  Various 
other  considerations  will  present  themselves,  such  as  the  stability 
of  the  industry,  its  hkelihood  of  survival,  the  capital  invested 
in  it,  etc. 

Competition.  Competition  should  be  studied  from  the  stand- 
point of  the  product,  its  price,  quahty,  location  and  ease  of  trans- 
portation, with  such  other  factors  as  may  occur  in  this  connection. 
It  also  should  be  studied  from  the  viewpoint  of  the  competing 
organization  itself,  its  purchasing,  production,  and  merchandizing 
methods,  etc. 

There  are  many  other  considerations  in  regard  to  competition, 
too  numerous  to  be  treated  here.  What  is  the  character  of  com- 
petition in  the  industry?  Is  there  a  tendency  among  competing 
companies  to  combine?  How  does  this  affect  the  company's 
problem? 

Who  are  the  company's  competitors?  How  large  are  they? 
Where  do  they  market?  What  are  their  relations  with  the  public? 
How  do  they  sell  their  goods? 

What  is  the  basis  of  competition?  Is  it  price,  better  terms, 
better  quality,  or  a  combination  of  these  and  others?  Other  data 
relating  to  competition  will  suggest  themselves,  such  as  the  class 
of  labor  employed,  its  availability  and  degree  of  skill,  the  pu})licity 
methods  ascd  by  competitors,  the  volume  of  advertising,  the 
results  obtained  therefrom,  etc. 

The  Company's  Customers.  The  company's  customers  may 
be  of  two  kinds — middlemen  or  consumers.  Information  from 
either  of  these  classes  is  usually  readily  available. 


10  MARKET  ANALYSIS 

The  survey  should  supjily  much  valuable  information  as  to  the 
purchasing  motives  of  customers,  why  they  bought  from  the 
company  in  the  past,  whether  it  was  because  of  tradition,  per- 
sonal feeling,  quicker  deliveries,  closer  location,  better  price,  better 
terms,  quality,  advertising,  service,  etc.  The  value  of  this  infor- 
mation will  vary  according  to  the  prestige  and  size  of  the  customer, 
and  to  the  intrinsic  merit  of  the  criticism. 

It  usually  is  desirable  to  ascertain  why  former  customers  have 
ceased  trading  with  the  company  and  whether  it  is  possible  to 
secure  this  patronage  again.  To  do  this,  not  only  the  reasons 
for  their  going  elsewhere  must  be  analyzed  but  also  whether 
these  reasons  are  still  well  founded. 

The  Market.  Much  of  the  routine  work  and  the  larger  por- 
tion of  the  field  work  will  have  to  be  done  in  connection  with  the 
customer  and  consumer  investigation.  This  section  of  the  survey 
work,  therefore,  should  be  started  as  soon  as  possible,  since  it 
may  take  considerable  time  to  gather  the  necessaiy  information. 

A  study  of  the  market  entails  an  investigation  of  what  persons 
are  going  to  bu}^  the  product,  where  they  are  located,  how  numer- 
ous they  are,  what  induces  them  to  buy,  and  what  prevents  them 
from  buying.  It  involves  a  scrutiny  of  the  actual  market  for  the 
product  as  compared  with  the  potential  market.  It  considers 
limitations  on  sales  due  to  the  characteristics  of  the  average 
consumer,  and  also  the  peculiarities  arising  from  geographical 
position.  The  purchasing  power  of  the  community  is  examined, 
and  also  the  price-range  within  which  the  company  may  hope 
to  sell  its  products. 

The  analj^sis  of  the  market  is  the  ultimate  purpose  of  nearly 
every  market  survey.  All  the  remainder  is  subservient  to  the 
question  of  fitting  the  needs  and  desires  of  the  market  to  the  pro- 
duction facilities  and  policies  of  the  company. 

Analyzing,  Interpreting,  and  Presenting  the  Data.  Methods 
of  obtaining  opinions  and  facts  for  a  market  report  are  as  numer- 
ous as  there  are  businesses,  and  almost  as  different  as  one  busi- 
ness is  from  another.  They  cannot  be  entirely  reduced  to  any 
final  standard  practice  until  human  nature  itself  has  been  stand- 
ardized. In  all  these  matters,  however,  it  is  necessary  to  get 
real  information  and  actual  facts.  How  they  are  obtained  does 
not  matter  so  much  as  getting  them. 


HOW  MARKET  SURVEYS   ARE  MADS  If 

In  any  case  where  the  future  must  be  reckoned  with,  opinions 
should  be  obtained.  Although  an  individual  opinion,  no  matter 
how  weighty,  is  prone  to  error,  the  consensus  of  a  great  many 
opinions  is  perhaps  the  safest  indicator  of  future  events.  But 
they  should  be  those  of  men  who  know,  if  business  men  are  to  be 
expected  to  risk  money  upon  them.  These  opinions,  together 
with  the  facts,  form  the  framework  upon  which  the  engineer 
builds  the  edifice  of  his  report. 

Throughout  the  actual  writing  of  the  report,  great  care  must 
be  taken  to  see  that  its  form  is  such  that  it  will  carry  its  message 
simply  and  forcibly.  In  fact,  the  form  of  the  report  itself  is  one 
of  those  factors  which  should  have  been  carefully  planned  at  the 
outset  of  the  investigation.  It  is  good  practice,  whenever  pos- 
sible, to  make  the  outline  of  the  preliminary  report  hke  that  of 
the  final  report. 

Reports  should  be  illustrated.  Graphic  methods  of  presen- 
tation enable  the  business  man  to  see  the  whole  panorama.  The 
industrial  engineer  already  has  brought  the  graphic  art  to  a  high 
pitch  with  his  schedules  and  planning  boards  and  cost  sheets. 
The  market  engineer  follows  in  his  footsteps  and  charts  markets. 

Formulating  the  conclusions  is  an  all-important  task,  since 
they  are  the  gist  of  the  entire  investigation.  A  report  which  has 
been  conscientiously  prepared,  and  which  is  based  upon  evidence 
from  a  sufficiently  large  range  of  sources,  is  certain  to  imply  its 
own  conclusions.  In  other  words,  if  several  persons  should  read 
the  report,  all  would  draw  from  it  approximately  the  same 
deductions.  It  is  good  policy  to  apply  this  test  to  every  report 
before  finally  submitting  it. 

Applying  the  Data.  A  report  wiU  be  of  little  value  to  the 
business  unless  it  is  acted  upon.  After  the  investigation  has  been 
completed,  a  certain  course  of  action  probably  will  suggest  itself. 
No  beneficial  results  are  to  be  expected  from  any  remedy  until 
it  has  been  administered.  The  application  of  findings  may  not 
be  within  the  province  of  the  man  who  made  the  survey,  yet  it 
never  should  escape  his  mind  that  the  success  of  his  work  is  in 
direct  ratio  to  the  expediency  and  applicability  of  his  recom- 
mendations. 

It  may  not  be  possible  to  act  on  the  report  at  once,  yet  the 
executives  for  whom  it  is  made  must  realize  that  the  conclusions 


12  MARKET  ANALYSIS 

of  a  properly  conducted  survey  will  represent  a  consensus  of 
facts  to  the  ultimatum  of  which,  sooner  or  later,  he  must  bow. 

The  completion  of  a  market  survey  necessarily  carries  no 
finality.  Conditions  in  every  industry  and  in  every  business  are 
always  changing.  The  market  survey  which  is  pertinent  today 
may  be  so  much  out-of-date  a  year  hence  as  to  be  an  actual 
menace.  Ever>'  market  report  should  be  brought  up  periodically 
for  revision.  Like  all  development  work,  the  analysis  of  markets, 
to  bring  in  the  greatest  revenue,  should  be  a  continuous  process. 

Having  obtained  an  idea  of  the  points  which  are  covered  by 
the  market  survey,  it  becomes  necessary  to  study  the  technique 
of  gathering,  assembling,  analyzing,  and  presenting  data,  and  of 
organizing  the  work.  The  following  four  chapters  will  be  devoted 
to  these  subjects. 


CHAPTER  II 
METHODS  OF  SECURING  DATA 

Outline 

What  are  the  existing  bibliographical  sources  of  information? 

A.  Where  may  bibliographical  information  be  obtained? 

1.  The  library. 
(a)    Public. 

(6)    The  company's. 

(c)    Technical  or  scientific  hbraries. 

2.  The  government. 

3.  Publicity  literature,  catalogues,  pamphlets,  etc. 

B.  What  books  have  been  written? 

1.  On  the  industry  in  general? 

2.  On  the  product? 

3.  On  merchandising  methods  (sales,  distribution  or  publicity)  used  for 

this  or  similar  products? 

C.  What  periodical  literature  may  be  of  help? 

1.  Trade  papers  and  periodicals. 

2.  General  periodicals  (Poole's  Index). 

D.  What  sources  of  statistical  information  are  available? 

1.  Government. 

2.  Libraries  with  statistical  departments. 

3.  Statistical  bureaus. 

4.  Trade  associations  and  periodicals. 

5.  Newspapers. 

E.  What  other  written  information  may  be  of  assistance? 

1.  Catalogues. 

2.  Pamphlets,  monographs,  etc. 

How  should  the  questionnaire  be  treated? 

A.  How  many  questionnaires  is  it  necessary  to  send  to  ensure  an  adequate 
number  of  replies? 
1.    Does  this  depend  on 

(a)    The  character  of  the  audience,  its  intelligence,  etc.? 
13 


14  Af ARRET  ANALYSIS 

(b)  The  interest  of  the  recipients  in  the  subject? 

(1)  Either  academic  or  technical  interest. 

(2)  Possible  commercial  interest. 

(c)  Inducement  to  reply? 

(1)  Promise  of  digest  of  findings. 

(2)  Stamped  addressed  envelope  enclosed. 

(3)  Special  delivery  stamp  affi.xed  to  return  envelope. 

(4)  Promise  to  keep  confidential. 

(5)  Assurance  that  no  salesmen  will  call. 

B.  To  whom  shall  questionnaires  be  sent? 

1.  To  authorities  on  the  subject, 
(a)    Technical  questions. 

2.  To  jobbers  or  other  intermediate  middlemen, 
(a)    Questions  of  distribution. 

3.  To  retailers. 

(a)    Sales  problems,  buying  habits  of  pubUe,  criticisms,  etc. 

4.  To  consumers. 

(a)    Questions   as    to    the    popularity    of    product,    reasons   why, 
criticisms. 

C.  WTiere  shall  mailing  lists  be  obtained? 

1.  From  commercial  registers  of  manufacturers. 

2.  Purchasable  mailing  lists. 

3.  Lists  already  possessed  by  the  company. 

4.  Lists  furnished  by  trade  papers. 

5.  Telephone  books  with  classified  directories. 

6.  City  directories. 

7.  Lists  furnished  by  jobbers. 

8.  Lists  furnished  by  newspapers. 

D.  'WTiat  are  the  requisites  of  a  questionnaire? 

1.  Depends  somewhat  on  whether  information  desired  is 

(a)  Statistical. 

(1)  Yes  and  No  type. 

(2)  Numerical. 

(3)  Categorical. 

(b)  Informative  and  critical. 

2.  Questionnaire  should  be  brief. 

3.  Logical  and  sequential. 

4.  Condensed. 

5.  No  opportunity  for  ambiguity. 

6.  Should  offend  no  prejudice. 

7.  Unbiased. 

8.  Questions  easily  understandable. 

9.  Made  easy  for  recipient  to  answer. 


METHODS  OF  SECURING  DATA  15 

E.  What  are  the  requisites  of  the  letter  accompanying  the  questionnaire? 

1.  Must  interest. 

2.  Courteous  and  not  flippant. 

3.  Short. 

4.  Should  state  reasons  for  wanting  information, 

5.  Must  be  sincere. 

F.  How  should  the  questionnaire  be  reproduced  and  sent? 

1.  Shall  it  be  multigraphed,  printed,  typewritten,  or  how  reproduced? 

2.  Should  it  be  combined  with  letter  or  separate? 

3.  Is  it  necessary  to  send  special  letters  requesting  information? 
(a)    To  those  who  do  not  fit  in  categories  of  questionnaire? 
(&)    To  specialists  from  whom  special  information  is  desired? 

What  is  the  sphere  of  the  interview? 

A.  What  are  its  advantages? 

1.  Does  it  obtain  a  larger  percentage  of  replies  than  other  methods? 

2.  Is  it  more  accurate? 

3.  Is  it  easier  to  obtain  information? 

4.  Is  information  more  comprehensive? 

B.  What  are  its  disadvantages? 

1.  Is  it  too  expensive  a  method  for  a  national  survey? 

2.  Is  its  value  dependent  on  the  interviewer  to  a  great  extent? 

3.  Is  an  interviewer  hkely  to  become  biased? 

4.  Must  interviewer  carry  written  questionnaire? 

C.  What  are  the  requisites  of  an  interviewer? 

1.  Must  be  able  to  observe. 

2.  Should  know  subject  under  investigation. 

3.  Must  be  tactful. 

4.  Must  know  how  to  meet  people. 

5.  Must  have  good  memory. 

6.  Must  know  how  to  obtain  entree. 


CHAPTER  II 
METHODS   OF   SECURING  DATA 

How  is  the  investigator  to  get  the  information  which  will 
enable  him  to  make  the  report?  Roughly  speaking,  there  are 
three  main  methods.  First,  bibliographical,  or  assimilation  of 
what  has  been  written  on  the  subject;  second,  by  questionnaires 
addressed  to  those  in  a  position  to  give  authoritative  information; 
and  third,  through  interviews  in  person. 

The  subjects  discussed  in  this  volume  will  not  necessarily  lend 
themselves  to  any  one  method  of  investigation,  but  some  seem 
to  be  more  easily  approached  by  one  channel  than  by  another. 
For  example,  in  treating  of  the  industry  in  general,  a  great  deal  of 
information  may  be  obtained  bibliographically.  On  the  other 
hand,  data  as  to  the  company  will  rarely  be  bibliographical,  but 
will  be  obtained  rather  by  personal  interview  and  by  reference 
to  company  records.  Some  companies,  it  is  true,  have  had  their 
histories  published,  yet,  although  there  may  be  a  certain  amount 
of  bibliographical  material  about  the  company,  it  is  likely  to  be 
limited  almost  entirely  to  narrative.  It  is  easily  possible  to  get 
too  much  histor}^  in  this  sort  of  work,  especially  history  which  is 
merely  qualitative. 

Information  as  to  competition  can  rarely  be  obtained  satis- 
factorily through  correspondence  with  competitors,  although 
often  a  great  deal  may  be  got  through  direct  interview.  It  is 
good  policy  to  interview  customers  in  person,  but  it  may  be  much 
more  economical  to  obtain  data  from  them  in  writing.  From  the 
ultimate  consumer,  data  in  writing  are  apt  to  be  careless  and 
ill-considered. 

One  method  productive  of  very  good  results  as  far  as  the 
product  is  concerned  is  to  submit  a  sample  to  the  house- 
wife for  her  opinion,  thus  obtaining  actual  first-hand  evidence 
on  the  product  and  its  competitors.  This  scheme  proved  very 
helpful  in  a  textile  investigation. 

16 


METHODS  OF  SECURING  DATA  17 

Various  similar  expedients,  particularly  adapted  to  the  research 
in  hand,  will  suggest  themselves.  One  investigator  spent  three 
days  behind  the  counter  of  a  large  department  store.  From  his 
experience  he  was  able  to  make  a  personal  size-up  of  what  the 
public  bought,  why  they  bought,  and  how  much  they  paid,  as 
well  as  to  record  a  number  of  shrewd  observations  as  to  buying 
habits  which  could  not  have  been  obtained  in  any  other  way. 

Bibliographical  Work.  If  possible,  bibliographical  work 
should  be  done  first.  It  allows  the  investigator  to  obtain  a 
grasp  of  all  that  has  been  previously  written  on  the  subject.  It 
frequently  saves  him  much  labor,  in  the  preparation  of  charts  and 
the  search  for  figures,  to  take  advantage  of  the  work  of  others. 
In  profiting  by  other  people's  mistakes,  it  also  prevents  him 
from  going  astray. 

With  market  research  work,  the  same  principles  hold  true 
as  with  any  other  class  of  research  work.  For  instance,  a  person 
doing  chemical  research  looks  up  the  chemical  abstracts  and 
finds  out  everything  that  has  been  done  on  this  particular  problem 
before  going  ahead  with  original  research.  This  is  exactly  the 
case  in  making  market  surveys.  Immediately  after  the  pre- 
liminary investigational  work  has  been  completed  is  the  time 
for  that  of  a  bibliographical  nature.  This  includes  both  work 
done  at  the  library  and  literature  obtained  from  outside  sources 
in  the  form  of  catalogues  and  pamphlets,  newspaper  articles,  etc. 

The  besetting  danger  in  all  bibliographical  studies  is  that  the 
material  may  be  out-of-date.  Conditions  change  with  such 
rapidity  that  what  was  true  twenty  or  even  ten  years  ago  may  be 
entirely  false  today,  yet  a  great  many  books  on  any  subject,  except 
those  of  recent  inception,  have  been  published  more  than  ten 
years  ago. 

{A)  The  Library.  Work  at  the  library  consists  first  of  exam- 
ining the  books  on  the  subject,  and  secondly  the  periodical 
literature. 

(1)  Books.  There  is  great  likelihood  of  the  surveyor's  being 
able  to  find  books  dealing  with  the  industry  in  general,  and  there 
may  be  also  technical  books  dealing  with  the  product. 

A  library  is  frequently  deficient  in  the  class  of  books  desired 
for  research,  especially  the  smaller  libraries.  The  appeal  of 
these  technical  books  is  so  specialized  and  directed  to  such  a 


18  MARKET  ANALYSIS 

small  audience  that  the  librarian  may  think  it  hardly  worth 
while  to  get  them.  ]\Iany  libraries,  however,  have  arrange- 
ments for  borrowing  from  each  other,  and  in  this  way  many 
valuable  works  maj^  often  become  available. 

The  investigator  should  not  forget  that  now  is  the  time  to 
gather  information  about  allied  industries,  and  that  often  when 
the  literature  concerning  the  subject  under  survey  is  rather 
•  scanty,  there  may  be  much  to  learn  from  literature  on  kindred 
industries.  For  instance,  in  an  investigation  of  shoes,  much 
material  might  be  obtained  from  books  on  leather,  since  the 
leather  industr}^  devotes  so  large  a  part  of  its  output  to  the  shoe 
industry-. 

Proper  bibliographical  work  entails  more  than  a  glimpse  at 
the  library'  catalogue.  Catalogues  are  often  faulty  when  it  comes 
to  investigatory  work.  The  bibliographer  must  use  one  source 
of  information  as  a  lever  by  which  to  pry  out  the  next.  Frequently 
one  book  mentions  another  as  authority.  In  this  way,  a  chain  is 
formed  which  leads  to  much  valuable  information. 

It  is  possible  to  have  the  bibhographical  work  done  outside. 
A  trained  bibliographer  can  often  do  such  work  much  more 
rapidly  and  efficiently  than  an  amateur.  For  example,  the 
Engineering  Societies  Library  in  New  York  does  this  work  on  all 
technical  subjects  at  a  very  reasonable  charge.  In  fact,  there 
are  several  such  bureaus. 

The  great  obstacle  to  thorough  bibhographical  work  is,  as 
mentioned  before,  the  lack  of  up-to-date  books  in  the  average 
hbrarj',  and  also  the  lack  of  completeness  in  any  individual 
collection.  There  is  also  the  danger  of  going  too  far  afield  and 
collecting  much  information  not  strictly  pertinent  to  the  inquiry. 
The  place  of  all  bibliographical  work  should  be  clearly  under- 
stood and  neither  over-  nor  under-emphasized.  Its  function  is 
to  supply  what  information  others  have  gathered  on  this  subject. 
The  investigator  never  knows  what  he  is  going  to  find  until  he 
looks,  and  he  should  go  through  the  Hbrary  with  a  view  to  exhaust- 
ing its  possibihties  under  all  angles  of  research  into  the  company's 
problems,  not  only  the  product  and  the  industry,  but  distribution 
and  sales  problems  as  well. 

The  company's  Hbrary,  if  it  has  one,  will  obviously  be  the 
first  place  to  begin  the  bibliographical  work.     The  average  com- 


METHODS  OF  SECURING  DATA  19 

pany  library  consists  of  a  few  technical  books  dealing  with  its 
own  particular  subject,  and  of  various  reports,  appraisals,  and 
miscellany  which  the  investigator  should  not  fail  to  take  advantage 
of.  Practically  every  company  that  has  been  through  the  ordeal 
of  scientific  management  has  a  quantity  of  literature  and  records. 
From  these,  it  may  be  possible  to  obtain  leads  for  further  biblio- 
graphical research. 

(2)  Periodicals.  In  every  industry  of  importance,  there  are 
trade  papers.  One  of  the  bibliographical  tasks  of  importance  is  to 
go  through  the  index  of  these  periodicals  and  examine  the  articles 
which  appear  relevant.  Chiefly  important  will  be  sidelights 
thrown  on  the  activity  and  progress  of  competitors. 

The  investigator  should  not  be  contented  to  look  up  the 
periodicals  themselves,  but  should  get  in  touch  with  the  editors 
of  those  magazines.  Editors  are  almost  always  willing  to  cooper- 
ate, and  their  comments  and  recommendations  are  frequently  very 
helpful.  It  is  well  to  make  it  understood  at  the  outset  that  the 
surveyor  cannot  agree  to  recommend  that  advertising  be  placed 
in  their  paper  in  return  for  the  information,  but  in  most  instances 
the  trade  papers  are  willing  to  supply  information  as  a  service 
to  potential  advertisers. 

In  addition  to  trade  papers,  there  may  be  other  articles  of 
interest  and  importance  elsewhere.  These  articles  may  be  found 
listed  elsewhere,  as  in  Poole's  Index  of  Periodicals,  The  Read- 
er's Guide  to  Periodical  Literature,  or  the  various  technical 
indexes.  In  addition  to  these,  the  Index  to  Chemical  Abstracts 
often  refers  to  many  articles  appearing  in  periodicals  which  might 
not  be  traced  otherwise,  and  these  references  are  not  necessarily 
of  a  chemical  nature. 

Another  possible  source  of  helpful  information  is  literature  on 
industries  selling  to  the  same  market. 

(3)  Statistical  Sources  of  Information.  From  the  point  of 
view  of  the  survey,  bibliographical  work  is  divided  into  historical, 
descriptive,  and  statistical  information.  The  historical  data 
usually  relate  to  the  industry  or  the  company,  or  perhaps  the 
history  of  the  product;  the  descriptive  material  has  to  do  with  the 
nature  of  the  present  product,  methods  of  merchandising,  and 
distributive  organization,  while  the  statistical  information  gives 
actual  figures  which  may  be  used  in  making  up  charts  and  tables. 


20  MARKET  ANALYSIS 

The  government  has  hitherto  been  the  chief  agency  for  gather- 
ing statistics,  tliroiigh  the  work  of  the  census  bureau  and  the 
various  statistical  bureaus.  The  information  is  readily  available 
and  as  authoritative  as  is  possible  with  any  work  of  such  enor- 
mous scope.  Although  other  statistical  studies  of  the  same 
subject  may  have  been  made,  they  are  frequently  hard  or  impos- 
sible to  locate.  Certain  libraries  have  statistical  departments 
which  may  prove  of  assistance;  local  newspapers  sometimes  can 
help;  trade  associations  and  journals  frequently  have  compiled 
statistics.  There  are  also  societies  which  devote  themselves 
more  or  less  exclusively  to  statistics. 

The  authority  for  any  figures  used  should  be  carefully  checked 
up.  Government  figures,  though  fairly  reliable,  are  often  too 
old  for  accurate  use  today.  That  is,  conditions  have  changed 
to  such  an  extent  that  more  up-to-date  information  is  necessary. 

(B)  Writteii  information  from  other  sources  than  libraries. 

Something  has  already  been  said  about  the  catalogues  and  other 
literature  which  may  be  obtained  from  competitors,  and  of  the 
importance  of  this  fact  in  relation  to  competition.  This  litera- 
ture is  equally  valuable  as  illustrating  the  publicity  methods  of 
other  members  of  the  industry,  the  way  in  which  they  obtain  their 
publicity,  the  kind  of  illustrations,  etc. 

The  investigator  should  make  a  point  of  collecting  all  such 
catalogues  obtainable.  He  may  also  send  to  the  various  trade 
associations  for  their  printed  literature.  In  addition  to  this, 
many  newspapers  maintain  trade  information  bureaus  which  will 
supply  facts  on  request.  It  is  better  to  err  on  the  safe  side  and 
write  a  few  extra  letters  rather  than  to  miss  any  opportunities 
for  securing  pertinent  facts. 

The  government  prints  a  booklet  indexing  the  various  pam- 
phlets published  by  the  government  printing  office,  and  the 
investigator  should  make  a  point  of  sending  for  them. 

Another  bibliographical  source  which  should  not  be  neglected 
is  the  Bureau  of  Foreign  and  Domestic  Commerce.  This  organi- 
zation maintains  several  district  offices  throughout  the  country 
at  which  ver>'^  complete  files  are  kept  of  information,  particu- 
larly in  regard  to  foreign  happenings  in  the  industry.. 

The  Questiomiaire.  The  questionnaire  has  been  the  object 
of  much  adverse  criticism  as  a  means  of  gathering  information. 


METHODS  OF  SECURING  DATA  21 

It  has  been  contended  that  it  is  not  worth  the  money  spent  upon 
it  when  personal  interviews  obtain  so  much  larger  a  percentage 
of  repUes  and  information.  The  answer  is  plain.  The  functions 
of  the  questionnaire  and  the  interview  are  supplementarJ^  For 
an  ordinary  investigation,  the  work  of  interviewing  personally 
must  necessarily  be  limited  to  local  or  semi-local  surveys.  It  is 
too  expensive  a  method  to  cover  the  country  by  personal  inter- 
view, while  a  questionnaire  can  be  sent  across  the  continent  for 
two  cents. 

It  is  true  that  many  people  dislike  troubling  themselves  to 
answer  a  written  questionnaire,  and  it  is  also  true  that  these 
same  people  might  answer  questions  put  by  a  personal  investi- 
gator. It  is,  again,  a  fact  that  in  some  cases  replies  to  written 
questionnaires  are  valueless.  But  it  is  believed  possible  to  frame 
a  questionnaire  in  such  a  manner  that  the  results  obtained  there- 
from will  justify  the  expenditure  and  ensure  reasonably  accurate 
results. 

How  many  questionnaires  must  be  sent  out  to  ensure  an 
adequate  number  of  replies  on  which  authoritative  conclusions  may 
be  drawn  up?  The  character  of  the  questionnaire  plus  the 
character  of  the  audience  will  determine  in  great  measure  the 
percentage  of  answers.  Then,  by  comparison  with  the  results 
of  previous  questionnaires  to  similar  audiences,  it  is  possible  with 
fair  accuracy  to  calculate  the  number  of  questionnaires  necessary 
to  send  in  order  to  obtain  the  desired  number  of  replies.  This 
number  should  be  ascertained  in  advance,  since  from  the  results 
of  the  questionnaire  must  be  made  up  many  of  the  charts  and 
statistical  exhibits. 

There  is  a  very  direct  relation  which  the  type  of  person  to 
whom  a  written  questionnaire  is  sent  holds  to  the  satisfac- 
tory character  of  the  replies.  Usually  the  more  intelligent  the 
audience,  the  better  the  replies.  This  does  not  necessarily  apply 
to  the  percentage  of  replies,  which  is  dependent  on  many  factors. 

As  instances  of  replies  to  questionnaires,  500  questionnaires 
were  sent  out  to  truck  users.  There  were  180  replies,  140  of  which 
answered  adequately  the  questions  asked.  Vogue  sent  question- 
naires to  the  first  fifteen  subscribers  listed  in  each  of  138  American 
cities  and  suburban  towns.  Forty  states  were  covered.  Two 
thousand  two  hundred  and  sixty-five  questionnaires  were  mailedJ 


22  MARKET  ANALYSIS 

Six  hundred  and  twenty-six  replies  were  received  promptly,  or 
27.6%.  Tliis  was  exceptionally  good.  Ordinarily,  20%  of  replies 
is  regarded  as  excellent. 

It  is  quite  possible  that  it  may  be  to  the  recipient's  advantage 
to  answer  the  questionnaire.  If  so,  it  will  increase  the  percentage 
of  replies.  In  the  case  of  a  new  product,  for  instance,  the  recipient 
of  the  questionnaire  may  wish  to  obtain  samples  or  actually  to 
purchase. 

Whenever  possible,  it  has  been  found  verj^  productive  of 
results  to  enclose  a  stamped  envelope  for  reply.  The  extra  cost 
is  negligible  compared  with  the  bettered  results.  In  some  cases 
this  is  not  necessary  or  even  desirable,  but  as  a  rule  the  courtesy 
is  appreciated.  The  stamp  itself  is  not  sufficient,  but  should  be 
attached  to  a  "self-addressed"  envelope.  Often  the  inconveni- 
ence of  affixing  the  postage  is  sufficient  to  deter  a  reply. 

Special  dehverj^  stamps  have  been  found  effective  in  the  case 
of  emergency.  The  recipient  is  somehow  more  impressed  with 
the  importance  of  the  questionnaire  and,  since  his  conscience 
usually  prevents  his  appropriating  the  ten-cent  stamp,  he  is 
considerably  more  apt  to  answer.  There  are  comparatively  few 
people  who  will  not  reply  to  a  special  delivery  letter,  in  the  first 
place  because  it  is  novel,  and  in  the  second  place,  because  it  has 
succeeded  in  arousing  their  interest.  Also,  this  scheme  brings 
in  replies  at  a  much  more  rapid  rate. 

A  telegram  questionnaire  is  still  more  insistent.  It  practically 
demands  reply.  In  some  cases,  it  is  possible  that  it  might  be 
valuable,  but  it  is  too  expensive,  save  for  emergency. 

One  of  the  most  telling  criticisms  of  the  questionnaire  method 
of  obtaining  information  is  that  no  one  wants  to  give  something 
for  nothing.  What  are  the  people  who  answer  the  questionnaire 
going  to  get  out  of  it?  One  plan  has  been  tried  with  excellent 
results,  namely,  in  writing  to  people  who  are  really  interested  in 
the  subject,  to  promise  to  send  them  a  digest  of  results  for  their 
own  use.  Tell  them  frankly  that  this  questionnaire  is  being  sent 
out  to  them,  to  their  competitors,  and  to  experts  on  the  subject. 
Do  not  try  to  disguise  a  questionnaire.  They  are  always  recogni- 
zable. 

Another  point  to  make  clear  to  the  recipient  is  that  the  replies 
will  be  treated  confidentially.     People  are  not  usually  inclined  to 


METHODS  OF  SECURING  DATA  23 

express  themselves  freely  if  they  think  they  are  going  to  be 
quoted.  This  is  often  brought  up  as  an  argument  in  favor  of  the 
verbal  interview  over  the  questionnaire. 

Still  another  point  to  remember  is  to  make  it  clear  in  the  letter 
that  no  salesmen  will  follow  up  the  letter,  although  the  case  may 
be  such  that  this  expedient  will  not  work  out. 

It  is  frequently  unnecessary  to  mention  the  name  of  the  com- 
pany for  which  the  investigation  is  being  made.  The  investigator 
will  find  it  profitable  in  many  cases  to  use  his  own  name  rather 
than  that  of  the  company.  In  the  first  place,  the  company  may 
not  wish  to  have  its  name  used,  and  in  the  second  place,  using  the 
individual's  name  may,  for  divers  reason,  bring  in  a  larger  pro- 
portion of  replies. 

Interest  in  the  Questionnaire.  To  obtain  satisfactory  results, 
the  person  to  whom  the  questionnaire  is  addressed  must  be  inter- 
ested in  the  problem.  It  should,  if  possible,  be  more  than  a  mere 
casual  interest;  it  is  for  this  reason  that  questionnaires  sent  to 
ultimate  consumers  are  less  likely  to  be  effective  unless  there  is 
an  incentive  for  them  to  reply  or  expend  any  thought  on  the 
problem. 

Textile  soap,  for  example,  is  a  minor  item  in  the  production 
of  cloth,  but  when  spindles  are  discussed,  the  mill  agent  is  inter- 
ested immediately,  because  it  may  mean  dollars  and  cents  to 
him.  He  will  accordingly  pay  attention  to  a  written  question- 
naire on  spindles  where  he  would  throw  a  questionnaire  on  tex- 
tile soap  into  the  waste  basket. 

In  an  investigation  of  matches  or  safety  pins,  it  would  be  of 
no  use  to  send  out  questionnaires  to  consumers,  few  of  whom 
spend  any  thought  on  matches  or  safety  pins,  know  the  make  of 
them,  regard  them  as  satisfactory  or  unsatisfactory,  or  have  any 
valuable  suggestions  to  make  as  to  their  improvement.  But 
when  it  is  a  question  of  washing  machines,  consumer  investigations 
may  prove  to  be  of  distinct  value.  A  washing  machine  is  an 
individual  product  and  a  new  product.  Thus,  consumer  investi- 
gations depend  for  their  value  upon  the  nature  of  the  products 
themselves. 

If  interest  can  be  aroused  in  the  subject  matter  of  the  question- 
naire, and  further,  if  any  assurance  can  be  given  that  the  recipient 
of  the  questionnaire  will  have  an  opportunity  to  see  a  digest  of 


24  MARKET  ANALYSIS 

its  results,  either  in  print  or  by  means  of  a  personal  copy,  the  suc- 
cess of  the  questionnaire  is  secured.  A  large  dealer  in  hardware 
sent  out  a  questionnaire  to  other  hardware  dealers,  with  a  view 
towards  ascertaining  the  extent  to  which  automobile  accessories 
were  merchandised  through  hardware  stores.  Five  thousand 
letters  were  sent  with  a  return  post  card  enclosed.  Sixteen 
hundred  and  ten  replies  were  received,  from  every  state  in  the 
union.  The  recipients  were  interested  because  the  subject  vitally 
concerned  them,  and  they,  too,  wished  to  know  whether  the  hard- 
ware store  was  to  be  in  the  future  an  outlet  for  automobile  acces- 
sories or  whether  it  was  only  a  passing  arrangement. 

Mayer  Brothers,  Chicago  clothing  manufacturers,  recenHy 
sent  out  a  questionnaire  in  behalf  of  their  service  department. 
To  an  exceedingly  detailed  Hst  of  questions,  a  50%  reply  was 
secured,  chiefly  because  the  audience  was  interested  in  the  ques- 
tionnaire's contents.     See  Fig.  1. 

To  Whom  Shall  Questionnaires  be  Sent?  In  general,  ques- 
tionnaires will  be  sent  to: 

(1)  Authorities  on  the  Subject,  technical  experts,  trade  papers, 
trade  associations,  chambers  of  commerce,  etc.  Questionnaires 
will  have  to  do  with  the  state  of  affairs  in  the  industry,  its  pros- 
pects, improvements  in  the  product,  satisfaction  with  the  product 
as  it  is  at  present,  etc. 

(2)  Jobbers,  whether  handhng  this  particular  line  or  not. 
The  jobber  is  not  ordinarily  so  willing  to  reply  as  those  in  the 
previous  classification.  He  must  see  some  reason  for  his  doing 
so.  Frequently,  the  questionnaire  comes  back  with  the  words, 
"Not  interested"  scrawled  across  the  face  of  it. 

(3)  Dealers.  As  many  dealers  as  possible  should  be  cir- 
cularized, and,  as  happens  most  frequently,  if  it  is  necessary'  to 
make  a  selection,  be  sure  that  it  is  representative,  not  only 
territorially,  but  according  to  size.  The  opinions  of  the  small 
dealer  are,  in  their  way,  as  important  as  those  of  the  big  retail 
factors.  Figs.  2  and  3  show  how  the  Milwaukee  Journal  differ- 
entiated their  customer  and  consumer  questiormaires. 

(4)  Consumers.  As  mentioned  before,  in  the  case  of  the 
ultimate  consumer,  the  nature  of  the  product  will  determine  ordi- 
narily whether  it  is  worth  while  to  attack  this  source  of  informa- 
tion by  questionnaire.     In  any  case,  it  is  difficult  to  get  coherent 


ASSEMBLING  AND  ANALYZING  DATA  25 


Advertising  Service  Exchange  Questionnaire 

Check  types  of  advertising  helps  you  find  best  suited  to  your  business. 

Clothing  newspaper  cuts.  Furnishing  department  cuts.  Movie  slides.  Show 
cards.  Merchandise  novelties.  Wrapping  paper  with  Ad.  Merchandise  envelopes 
with  Ad.  Newspaper  advertising.  Personal  letter  advertising.  Special  circular 
advertising.  Special  sale  advertising.  Transparent  signs.  Metal  plaque  and 
mounted  glass  signs.     Advertising  package  enclosures.     Stationery  with  Ads. 

Could  you  use  a  special  booklet  giving  concrete  suggestions  to  your  sales  help  on 
the  subject  of  selling  clothes,  including  not  only  the  principles  of  selling,  but  also  a 
brief  discourse  on  clothes-making  and  materials? 

In  your  opinion,  would  it  be  advisable  to  issue  regular  Advertising  Aid  Cata- 
logues to  the  clothing  merchants — these  catalogues  to  contain  floral  window  decora- 
tions, special  service  cuts,  suitable  novelties  of  the  day,  special  art  service,  special 
price  tickets,  display  cards,  carry-all  bags,  moth-proof  bags,  and  other  items  of  vital 
i  nterest  to  advertising  and  sales  departments  of  clothing  stores — all  of  these  articles 
to  be  sold  at  actual  cost? 

Do  you  find  regular  seasonable  sales  an  aid  to  your  business? 

Do  you  believe  in  community  work? — that  is,  an  organization  of  business  men 
for  bettering  town  conditions  and  creating  friendly  feeling  between  the  business 
man  and  the  farmer? 

Is  the  retail  mail-order  business  a  problem  in  your  section?  Have  you  been  able 
to  combat  the  problem?     If  so,  please  tell  us  how. 

If  you  were  conducting  the  advertising  department  of  a  clothing  manufacturer, 
what  type  of  service  would  you  give  the  merchants  from  an  advertising  and  sales 
promotion  standpoint? 

Do  you  believe  in  advertising  nationally  advertised  clothes  lines  over  your  own 
name,  or  do  you  prefer  advertising  your  own  store  and  clothing  under  your  own 
name? 

Do  you  believe  that  poster  advertising  is  beneficial  to  merchants? 

If  a  number  of  full-sized  posters,  beautifully  colored,  were  furnished  you,  free 
of  charge,  would  you  see  that  these  posters  were  placed  on  billboards  and  pay  the 
billboard  charges? 

Are  you  in  favor  of  sending  style  books  to  the  consumer? 

Would  you  think  it  advisable  to  have  one  style  book  that  would  include  both 
the  men's  and  boys'  clothing,  or  do  you  think  it  would  be  better  to  have  different 
style  books — one  showing  boys'  clothing  and  the  other  showing  young  men's  clothing? 

If  you  were  to  issue  style  booklets,  and  envelopes  free,  and  take  care  of  the 
mailing  free  of  charge,  would  you  be  willing  to  pay  the  postage  charges  of  1  cent  on 
each  mailing,  and  furnish  us  with  a  mailing  list? 

In  your  opinion,  why  do  men  favor  and  buy  certain  brands  of  clothing? 

Why  do  mothers  and  boys  buy  certain  brands  of  clothing? 

Are  you  at  present  handling  any  advertised  brand  of  clothing  for  men?  For 
boys? 

If  so,  for  how  long  a  period? 

What  percentage  of  your  customers  specifically  inquire  for  the  lines  so  advertised? 

From  your  own  experience,  have  you  found  animated  movie  film  advertising 
effective? 

Assuming  that  we  were  to  prepare  an  interesting  movie  film  that  would  vitally 
interest  the  trade  in  your  store  would  you  be  willing  to  pay  not  more  than  $7.50 
towards  the  cost  of  the  film? 


Fig.  1. — Questionnaire,  the  success  of  which  wxs  due  to  Recipient's  Interest 
in  Subject. — {Printer's  Ink  Monthly.) 


2G  MARKET  ANALYSIS 


Name Address 

Tyi)e  of  Store Party  Interviewed .... 

What  brands  do  you  sell  in  each  of  these  divisions? 

Cigars Cigarettes Tobacco . 


^\Tmt  price  cigars,  cigarettes  and  tobacco  show  the  biggest  increase 
in  sales? 

Cigars Cigarettes Tobacco 

To  what  do  you  attribute  the  success  of  the  leading  brands? 


Do  you  push  any  certain  brands? 

Do  men  ask  for  cigars,  cigarettes,  and  tobacco  by  name? . 


WTiat  priced  cigars,  cigarettes  and  tobacco  are  the  best  sellers? 

Cigars Cigarettes Tobacco . 

Do  men  often  switch  from  one  brand  to  another? 

Whv? 


■WTiat  manufacturers'  advertising  is  of  greatest  assistance  to  you  in 
increasing  your  cigar,  cigarette,  and  tobacco  business?    


In  what  Milwaukee  newspaper  would  you  recommend  a  manufacturer 
of  cigars,  cigarettes  or  tobacco  to  advertise  in  order  to  secure  the  best 

results 

General  Remarks: — 


Fig.  2. — Questionnaire    used    in    securing    data    from    dealers. — (Milwaukee 

Journal.) 


METHODS  OF  SECURING  DATA  27 


What  is  your  line  of  work?    (Please  classify  as  oflBce,  heavy  labor, 
outside,  etc.) 


Do  you  smoke? 

What  do  you  smoke? 

Cigars Cigarettes Pipe 

How  much  do  you  smoke  a  week? 

No.  of  No.  of  packages  No.  of  packages 

cigars ....  of  cigarettes ....  of  tobacco .... 

Is  price  an  influence  in  your  purchase  of  the  above? 

What  are  your  favorite  brands? 


Do  you  often  change  from  one  brand  to  another? 

Why?, 

Does  newspaper  advertising  influence  you  in  your  purchases?. 


General  Remarks: — (Please  give  any  opinion  or  reasons  you  may  have 
in  regard  to  the  above.) 


Name 

Address . 


Fig.  3. — Questionnaire  used  in  securing  data  from   consumers. — {Milwaukee 

Journal.) 


2S  MARKET  ANALYSIS 

answers  to  general  questions,  and  the  element  of  error  in  answer- 
ing quantitative  or  "yes  and  no"  questions  is  large.  Many 
individuals  seem  to  put  down  whatever  comes  into  their  heads. 

Another  difficulty  found  in  sending  questionnaires  to  consum- 
ers is  that  it  is  hard  to  fix  upon  any  inducement  to  offer  them  for 
a  reply.  They  care  nothing  for  a  digest  of  findings.  It  is  a  curi- 
ous psychological  fact,  however,  that  many  of  them  do  reply.  It 
is  a  safe  rule  to  follow  here  that  a  stamped  and  self-addressed 
envelope  is  practically  a  necessity.  Even  then,  the  consumer 
questionnaire  is  a  doubtful  expedient  except  under  very  favorable 
circumstances. 

The  important  point  in  phrasing  a  questionnaire  to  the  con- 
sumer is  to  arouse  his  interest.  If  the  questions  appeal  to  his 
mechanical  sense  or  his  concern  for  current  affairs,  or  if  in  any 
way  he  can  be  kept  interested  for  the  moments  necessary  for 
filHng  in  the  blanks,  he  may  send  in  the  reply.  It  is  practically 
impossible  to  keep  him  absorbed  for  long,  and  he  cannot  be  expected 
to  spend  much  time  over  a  lengthy  and  detailed  list  of  questions. 

He  can  be  flattered,  he  can  be  made  to  feel  that  his  opinions 
carry  weight,  and  that  his  reply  will  be  valued.  It  is  human 
nature  to  feel  pleased  at  being  asked  for  advice.  Fig.  4  shows 
an  example  of  a  consumer  questionnaire,  sent  out  by  the  Nast 
pubhcations,  which  received  excellent  results. 

The  chances  are  that  men  of  authority  will  reply.  Such  men 
have  an  interest  in  the  subject  itself.  It  also  may  make  some 
difference  to  them  to  learn  the  results  of  the  findings.  They  will 
usually  wish  a  digest.  As  authorities  are  not  ordinarily  numer- 
ous, the  task  of  preparing  a  digest  is  not  difficult,  being  merely  a 
recapitulation  of  the  results  of  the  questionnaire. 

The  jobber  will  have  practical  opinions.  He  should  be  asked 
practical  questions.  The  jobber  is  not  always  so  intelhgent  as 
an  expert  on  the  subject  and  he  cannot  be  expected  to  answer 
technical  questions.  It  is  also  valueless  to  ask  questions  which 
in  his  opinion  will  pry  into  the  secrets  of  his  business,  such  ques- 
tions, for  instance,  as  "How  much  profit  did  you  make  last  year 
on  such-and-such  a  product?"  An  interviewer  might  get  this 
fact  out  of  him  and  other  similar  facts,  but  there  are  some  things 
people  hesitate  to  commit  to  writing. 

The  dealer's  opinion  may  depend  in  value  upon  his  location. 


METHODS  OF  SECURING  DATA  29 

From  To  Mr.  CONDE  NAST,  Publisher  of  Vogue 

Address  19  West  44th  Street,  New  York  City 

To  help  determine  whether  the  type  of  woman  who  reads  Vogue  directs  and  con- 
trols the  purchase  of  food  for  her  family,  or  whether  she  allows  unregulated  dis- 
cretion to  her  servants,  you  will,  as  a  Vogue  subscriber,  kindly  answer  the  following 
questions: 

1.  PLANNING  THE  DAILY  MENU 

a.  Do  you  supervise  the  planning  of  the  daily  menu? 

b.  Do  you  leave  this  to  your  chef  or  cook? 

2.  THE  PURCHASE  OF  FOOD 

a.  Do  you  direct  the  ordering  of  food? 

b.  Do  you  give  your  servants  discretion  in  purchasing? 

3.  INSISTENCE  ON  QUALITY 

a.  Do  you  specify  by  name,  or  brand,  the  food  you  order — such  as  bacon, 
tinned  soups  and  meat  products,  preserved  vegetables  and  fruits — and  insist 
upon  receiving  exactly  what  you  ask  for? 

6.  Do  you  permit  the  tradesman  to  substitute  brands  that  are  not  known 
to  you? 

VOGUE'S    HOSTESS    DEPARTMENT 

We  take  advantage  of  the  present  opportunity  to  inform  you  that  the  "Hostess 
Department"  of  Vogue  is  to  be  greatly  enlarged,  with  the  idea  to  afford  even  a 
better  service  to  our  readers.  If  Vogue  had  a  fairly  accurate  idea  of  the  actual 
family  and  household  requirements  of  its  readers,  the'  "Hostess  Department" 
would  be  doubly  efficient.  This  usefulness  could  be  approximately  achieved  if 
you  would  help  by  answering  the  following  questions: 

1.  How  many  are  there  in  your  family? 

2.  How  many  servants  do  you  employ? 

3.  About  how  many  guests  do  you  entertain  each  week? 

4.  How  can  the  "Hostess  Department"  best  serve   YOU? 


Answers  to  these  questions  will  be  sincerely  appreciated.     Your  name  will  not  be 
used  in  any  way. 


Fig.  4. — Consumer  Questionnaire.     (Prejjared  by  "Vogue") 


30  MARKET  ANALYSIS 

It  is,  therefore,  important  to  get  his  name  and  address.  It  ig 
well  to  give  liim  an  opportunity  to  sign  his  name.  Most  people 
hesitate  to  send  out  ill-considered  opinions  over  their  signatures. 

Mailing  Lists.  The  lists  of  people  to  whom  questionnaires 
are  to  be  sent  depends  on  the  character  of  the  questionnaire  and 
the  information  which  it  is  desired  to  elicit.  In  the  first  place, 
it  is  likely  that  a  list  of  competitors  will  be  required.  The  com- 
pany should  be  able  to  furnish  a  fairly  complete  one,  although 
in  most  cases  it  will  be  necessary  to  supplement  it  by  an  examina- 
tion of  the  commercial  registers  both  of  this  countr}^  and  abroad. 
Through  these  same  registers  may  be  found  manufacturers  of 
articles  appealing  to  the  same  market,  although  not,  strictly 
speaking,  competitors. 

Where  it  is  desired  to  make  an  intensive  survey  of  the  field 
through  dealers,  there  are  several  methods.  In  some  cases, 
where  the  company  sells  through  jobbers,  it  may  not  be  known 
who  the  dealers  are.  The  jobber  may  or  may  not  be  willing  to 
furnish  this  information.  It  will  depend  on  his  understanding 
of  the  motive  for  the  request.  As  he  is  naturally  rather  appre- 
hensive about  his  stabihty,  he  will  hesitate  before  furnishing  a 
list  of  his  own  customers,  thinking  perhaps  that  the  company 
might  wish  these  names  in  order  to  start  a  direct  offensive  of 
its  own.  In  most  cases,  however,  the  jobber  can  be  convinced 
that  it  is  for  his  advantage  to  furnish  names. 

If  it  is  desired  to  extend  the  survey  beyond  the  company's 
own  chain  of  distribution,  directories  may  be  used  in  the  large 
cities  for  lists  of  dealers.  In  many  places  the  telephone  book 
is  valuable  where  it  possesses  a  classified  list,  such  as  the  New 
York  "Red  Book."  The  trade  papers  may  be  able  to  help  in 
obtaining  names  of  experts  on  the  subject.  The  local  news- 
papers are  ordinarily  wilHng  and  able  to  help  in  local  field  sur- 
veys. Trade  associations  frequently  have  more  or  less  com- 
plete lists  dealing  with  their  industry. 

In  addition  to  such  sources  as  the  above,  there  are  dealers 
in  mailing  lists  who  will  sell  a  list  on  almost  any  subject. 
R.  P.  Rope,  of  the  Larkin  Company,  estimates  that  names 
for  their  hsts  obtained  in  this  way  cost  about  $4  per  thousand 
on  the  average,  and  it  is  frequently  to  the  surveyor's  advantage 
to  purchase  such  a  hst  as  a  saving  in  time  and  expense. 


METHODS  OF  SECURING  DATA  31 

The  investigator  may  have  to  make  up  his  own  mailing  lists. 
Suppose,  for  example,  that  it  is  an  entirely  new  product.  In  such 
cases,  he  must  use  his  imagination  in  thinking  up  possible  users 
and  dealers,  or  others  who  might  be  interested. 

Formulating  the  Questionnaire.  The  investigator  is  going 
to  find  himself  confronted  with  a  large  number  of  problems 
which  demand  solution  or  confirmation.  He  cannot  expect  to 
formulate  one  questionnaire  which  will  embrace  all  these  points. 
Indeed,  this  would  be  a  mistake.  He  must  sort  out  his  questions 
according  to  their  applicability  to  his  different  audiences.  Some 
questions  may  apply  to  everyone;  some  to  only  one  audience. 
For  example,  a  question  on  merchandising  might  be  referred 
to  retailers,  advertising  to  advertising  agencies,  technical  ques- 
tions to  engineers,  etc.  Each  investigation  will  require  a  number 
of  questionnaires  unless  the  work  is  to  be  confined  to  a  field  sur- 
vey and  thus  entirely  to  interviewing. 

Fig.  5  shows  how  the  Chicago  Tribune  first  set  down  what 
it  wished  to  determine  about  cleansers,  and  then  how  from  these 
questions  made  up  the  questionnaire. 

Questionnaires  may  be  sent  out  for  at  least  two  principal  pur- 
poses, first  for  eliciting  criticism,  comment,  or  opinion,  and 
general  remarks,  and  second,  for  obtaining  statistical  information 
from  which  tabulated  results  can  be  made.  A  combined  form 
may,  in  some  cases,  be  used  to  advantage. 

It  is  not  wise  to  bother  authorities  with  trivial  questions. 
The  questionnaire  in  this  case  must  be  more  personal,  and  the 
language  may  be  technical.  An  important  question  to  ask 
authorities  on  the  subject  is  what  sources  of  information  other 
than  themselves  they  would  care  to  recommend.  Frequently 
exceedingly  valuable  results  are  obtained  in  this  way. 

The  ordinary'  form  of  questionnaire  is  the  one  which  seeks  to 
get  an  answer  of  "Yes"  or  "No,"  or  a  figure.  This  requires  the 
greatest  care  in  drawing  up  the  questionnaire.  There  must  be 
no  ambiguity,  and  there  must  be  no  possibility  of  misconstruction. 
Two  thoughts  must  not  be  put  in  the  same  question. 

It  is  frequently  necessary,  therefore,  to  eliminate  the  general 
and  to  pick  the  specific.  Although  general  facts  are  valuable  in 
any  commercial  research,  specific  facts  are  the  only  ones  capable 
of   being  marshalled   statistically.     These   specific   data   should 


32  MARKET  ANALYSIS 

CLEANSER  INVESTIGATION 
We  were  desirous  of  determining: 

(a)  TMiich  cleanser  had  largest  distribution  and  which  was  the  best 
seller 

(6)  Whether  the  sale  of  soap  powders  (such  as  Gold  Dust)  con- 
fhcted  in  any  way  with  cleansers,  scouring  powders  (such  as  Old 
Dutch)  and  if  so,  what  percentage  of  women  depended  wholly 
upon  soap  powders 

(c)  Whether  Old  Dutch  Cleanser  was  increasing  or  decreasing  in 
sale  in  the  past  year 

(d)  General  comment  on  cleansers 

We,  therefore,  asked  the  following  questions  of  each  dealer  in- 
terviewed: 

(1)  What  are  your  five  best  selling  brands  of  cleansers?  Scouring 
powders,  such  as  Old  Dutch  ? 

(2)  Do  you  think  there  are  many  housewives  who  do  not  use  cleansers 
but  depend  solely  upon  soap  powders,  such  as  Gold  Dust,  for 
scouring  and  shining  kitchen  utensils,  bath  tubs,  etc  ? 


(3)  If  so,  what  percentage  and  why  in  your  opinion? 

(4)  Have  you  noticed  any  increase  or  decrease  in  the  sale  of  Old 
Dutch  Cleanser  in  the  past  year? 

(5)  General  comment  on  cleansers,  particularly  Old  Dutch 


Fig.   5, — Basis    upon    which    questionnaire    was    formulated. — (Chicago 

Tribune.) 


METHODS  OF  SECURING  DATA  33 

be  of  as  homogeneous  a  nature  as  possible.  For  example,  to 
determine  the  average  life  of  a  lawn  mower,  eveiyone  offering  an 
opinion  should  render  it  in  the  same  terms.  It  would  be  impossible 
to  integrate  results  accurately  if  some  users  stated  how  many- 
years  they  had  used  their  mowers,  while  others  reported  how  many 
times  they  had  used  them,  and  still  others  gave  their  answers  in 
miles  the  mower  had  travelled. 

Eveiy  questionnaire  should  be  as  brief  as  possible.  People 
are  likely  to  be  overwhelmed  at  the  presentation  or  receipt  of  a 
large  sheet  covered  with  interrogations. 

The  questions  must  be  in  logical  order  to  accomplish  their 
purpose  to  best  advantage.  It  would  appear  advisable  that  if 
both  interviews  and  letter  writing  are  to  be  done,  a  few  inter- 
views should  be  had  first  and  the  questionnaire  should  be  con- 
structed on  the  basis  of  these  interviews. 

It  is  important  when  writing  a  question  or  putting  one  verbally 
not  to  bias  the  listener  by  the  mere  form  of  the  question.  For 
example,  if  you  ask  a  person  this  question:  "Don't  you  think  it  is 
better  policy  to  buy  advertised  goods?"  most  people  are  going 
to  answer  "Yes."  This  is  not  a  fair  way  to  put  the  question. 
It  is  salesmanship,  not  research. 

A  written  questionnaire  requires  perhaps  more  thought  than 
an  interview  questionnaire,  because  written  questionnaires  are 
really  nothing  more  nor  less  than  dialogues,  and  the  questions 
must  be  sequential. 

The  questionnaire  must  be  condensed  as  much  as  is  possible, 
while  still  avoiding  indefiniteness  and  ambiguity.  Two  questions 
should  not  remain  on  the  questionnaire  where  one  would  serve 
equally  well.  No  questions  should  be  asked  which  the  persons 
questioned  cannot  answer  readily  from  their  own  knowledge. 
It  does  no  good  to  have  a  question  on  the  list  which  receives  a 
list  of  "I  don't  knows,"  unless  this  very  lack  of  knowledge  is  a 
thing  the  surveyor  wishes  to  measure. 

It  is  doubtful  pohcy  to  include  queries  which  those  questioned 
may  not  be  willing  to  answer,  either  because  of  the  way  the 
question  is  framed  or  because  of  the  character  of  the  question. 
For  instance,  if  it  were  desired  to  ascertain  the  average  age  of 
the  purchasers  of  a  certain  product,  it  might  be  difficult  to  put 
this  question  in  such  a  way  as  to  elicit  correct  answers.     The 


34  MARKET  AXALYSIS 

common  result  of  this  sort  of  question  is  an  evasive,  false,  or 
facetious  answer.  If  the  questionnaire  is  intended  to  secure 
expressions  of  opinion,  then  in  order  to  secure  the  best  results 
it  is  advisable  to  leave  ample  space  between  the  questions.  If, 
on  the  contrary,  the  questionnaire  is  meant  to  elicit  tabular 
replies  only,  then  the  more  convenient  it  is  for  the  person  ques- 
tioned to  make  a  check  or  a  mark,  the  more  likely  the  investi- 
gator is  to  receive  replies. 

Quite  frequently  it  has  been  the  custom  to  send  the  question- 
naire in  the  form  of  a  postcard.  All  the  recipient  has  to  do  is  to 
make  a  few  check  marks  and  drop  it  in  the  mail.  This  form 
often  has  excellent  results  in  getting  information  of  the  "  Yes  and 
No  "  type  from  jobbers  and  dealers.  It  may  be  sent  periodically 
to  customers  who  have  been  educated  to  return  them. 

One  disadvantage  of  this  type  of  questionnaire  is  that  it 
permits  little  space  for  question  and  answer.  The  form  must 
be  tabloid.  Where  the  questionnaire  is  sent  to  people  not  nor- 
mally interested,  the  postcards  frequently  go  in  the  wastebasket. 

Writing  the  Letter  to  Accompany  the  Questionnaire.  On  the 
contents  and  form  of  the  letter  which  accompanies  the  question- 
naire will  depend  much  of  the  success  of  the  replies.  In  the 
first  place,  the  letter  must  interest.  It  must  be  original;  not  a 
mere  stereotyped  request  for  information. 

It  should  state  clearly  the  reasons  for  wishing  to  get  this  infor- 
mation and  why  this  particular  person  was  approached.  It  must 
take  the  reader  into  confidence  and  tell  why  his  opinion  is 
important. 

It  should  not  be  flippant,  but  courteous.  There  need  be 
no  ornamentation.  The  letter  should  be  on  one  sheet  of  paper 
and  no  longer  than  absolutely  necessary. 

There  are  cases  where  the  letter  and  questionnaire  can  be 
combined. 

There  ought  to  be  a  time  limit  set  on  the  questionnaire.  If 
there  is  no  such  date  set,  answers  usually  keep  pouring  in  for 
weeks.  The  surveyor  should  say  something  like  this  in  the 
questionnaire,  or  in  the  letter  accompanying  it:  "  If  I  receive 
your  letter  not  later  than  such  and  such  a  date,  it  will  reach  me 
in  time  to  be  classified."  This  will  simply  be  a  reminder  to  send 
the  reply  promptly. 


METHODS  OF  SECURING  DATA  35 

Should  the  questionnaires  and  letters  be  written  by  type- 
writer, mimeograph,  multigraph,  be  printed,  written  in  long- 
hand, or  got  out  by  other  process?  It  is  often  a  question  of  qual- 
ity vs.  quantity.  Where  there  are  very  few,  as  is  the  ease  with 
experts,  it  may  pay  to  typewrite  them.     But  ordinarily  some 


Dear  Sir: 

It  is  the  small  favors  in  life — those  easily  done — that  are  often  most 
highly  esteemed. 

I  am  enclosing  a  postal  card  which  I  would  thank  you  to  check  and 
mail  immediately. 

I  have  so  worded  the  post  card  that  the  only  thing  necessary  for  you 
to  do  is  to  place  a  pencil  check  opposite  the  phonograph  you  have  in 
your  home. 

I  am  very  anxious  to  have  your  reply  here  by  Monday. 

It  is  not  necessary  for  you  to  sign  the  postal  card.  If  you  do  sign  it, 
your  name  will  not  be  used  in  any  way. 

Won't  you  please  do  this  for  Vanity  Fair? 

Thank  you. 

Very  sincerely  yours, 


Fig.  6. — Example  of  letter  to  accompany  Questionnaire. 

quantity  process  of  reproduction  must  be  employed.  Generally, 
the  letter  should  be  personal  to  the  extent  of  having  the  recipient's 
name  and  address  filled  in  on  the  letter. 

Fig.  6  is  an  excellent  example  of  a  letter  intended  to  accom- 
pany a  questionnaire. 


36  MARKET  ANALYSIS 

Special  Letters.  There  are  always  some  people  to  whom 
questionnaires,  for  one  reason  or  another,  are  inapplicable.  It  is 
not  desirable,  at  least  from  the  viewpoint  of  obtaining  answers, 
to  make  an  eminent  authority  feel  he  is  merely  one  of  a  million. 
It  is  possible,  however,  to  formulate  a  letter  which  may  be  used 
for  a  number  of  people.  Although  this  letter  is  in  reality  a  form 
letter,  yet  it  appears  individual  to  the  recipient  through  his  interest 
in  the  subject. 

An  original  letter  frequently  elicits  an  answer  which  it  is 
desirable  to  supplement  by  further  correspondence.  A  certain 
part  of  each  day  will  have  to  be  devoted  to  the  routine  of  such 
correspondence,  but  it  is  a  satisfaction  to  feel  that  such  letters 
bring  results. 

The  Interview.  Interviewing  has  decided  advantages  over 
other  methods  of  obtaining  information,  particularly  for  localized 
investigations.  If,  for  instance,  the  investigation  were  on  the 
market  for  a  food  product  in  a  certain  city,  it  would  be  far 
better  to  interview  all  the  principal  dealers  in  that  city  than  to 
send  them  questionnaires.  It  is  a  certainty  that,  even  at  best,  only 
a  small  percentage  would  answer  the  questionnaire,  whereas  a 
majority  would  register  their  opinions  when  questioned  in  person. 
If,  on  the  other  hand,  the  investigation  were  national  in  scope, 
then  a  written  questionnaire  would  have  to  be  used,  or  perhaps  a 
combination  of  both,  by  using  the  interview  in  certain  selected 
sections,  and  using  questionnaires  for  the  rest  of  the  country. 

A  properly  qualified  interviewer  can  get  much  information, 
space  for  which  cannot  be  provided  on  the  questionnaire.  He 
can  obtain  opinions  and  theories  and  suggestions.  He  will  hear 
comments  on  competing  products.  The  degree  of  accuracy  in 
results  is  probably  greater,  providing  the  interview  is  satisfactory. 
Fuller  results  will  be  of  no  particular  value  in  a  tabular  ques- 
tionnaire. 

As  to  the  number  of  interviews  required,  in  the  city  of  Indian- 
apoHs  proprietors  of  70  drug  stores  were  interviewed  by  represen- 
tatives of  the  Indianapolis  News.  Fifty  were  in  neighbor- 
hood districts,  twenty  in  down-town  districts,  all  sizes  and  classes. 
Past  experience  had  proved  to  this  paper  that  this  number  of 
personal  interviews  was  sufficient  to  give  an  accurate  index  to  the 
situation  in  the  entire  city  of  Indianapolis. 


METHODS  OF  SECURING  DATA  37 

Inten-iewing,  however,  has  many  serious  disadvantages. 
To  begin  with,  the  results  of  a  series  of  interviews  are  hkely  to 
be  so  vague,  so  general,  and  so  detailed  that  they  do  not  lend 
themselves  to  being  classified  and  averaged.  This  may  be  over- 
come by  supplying  the  interviewer  with  what  amounts  to  a 
regular  questionnaire  form  and  have  him  simply  jot  down  the 
answers  in  spaces  allotted.  The  drawback  to  this  is  that  it  makes 
the  collector  of  data  merely  a  mechanical  device.  Such  a  method 
is  highly  effective  in  cases  where  merely  tabular  answers  are 
desired,  but  when  it  is  a  question  of  recording  shades  of  opinion, 
the  interviewer  must  know  his  subject  and  be  able  to  converse 
intelligently. 

If  the  interviewer  carries  with  him  a  form  questionnaire,  it 
has  the  advantage  that  it  phrases  each  question  in  a  perfectly 
distinct  manner  and  there  can  be  no  misunderstanding  of  it. 
Results  are  therefore  likely  to  be  accurate  as  far  as  they  go. 
Fig.  7  shows  form  used  by  the  Milwaukee  Journal  investigator 
in  a  breakfast  food  survey. 

The  ideal  method  of  gathering  the  information  by  interview 
would  seem  to  be  to  supply  the  interviewer  with  a  short  series  of 
definite  questions  and  also  instruct  him  to  obtain  further  infor- 
mation of  a  qualifying  character,  and  perhaps  of  a  more  or  less 
general  nature,  since  no  line-up  of  questions  can  be  made  in 
advance  which  will  cover  all  special  cases,  and  many  of  these 
special  cases  are  exceedingly  important  as  illustrating  special 
tendencies. 

One  great  danger  in  interviewing  is  that  the  interviewer  will 
not  maintain  a  perfectly  open  mind.  By  the  time  he  has  com- 
pleted a  dozen  interviews  he  has  formulated  some  decided  opinions 
of  his  own.  He  has  already  made  his  decision  as  to  which  way  the 
race  is  going.  He  has  become  partisan.  He  gets  the  feeling  that 
he  can  write  the  interview  without  even  talking  with  the  man. 
Although  he  may  not  actually  do  this,  he  is  veiy  apt  to  lead  the 
man  by  his  questioning,  innocently  enough,  or  to  hurry  him  on 
to  make  an  ill-considered  reply.  Since  the  interviewer  frequently 
knows  more  about  the  subject  than  the  man  l)eing  interviewed, 
the  latter  is  in  danger  of  becoming  a  listener  rather  than  a  talker. 

This,  at  least,  is  often  the  case  with  interviewers  who  have 
had  their  training  as  newspaper  reporters,  where  a  large  propor- 

147018 


38  MARKET  ANALYSIS 


Name Address 

TjTJc  of  Store Party  Interviewed . 


What  brands  of  breakfast  foods  do  you  carry?    (Please  list  first  three 
in  order  of  popularity.) 

Oat Wheat Corn Misc 

What  is  the  reason  for  these  "best  sellers'  "  popularity? 


WTiat  is  the  biggest  selling  brand  of  all  breakfast  foods? . 


WTiat  is  the  1st,  2nd  and  3rd  order  of  demand  for  the  various  kinds  of 
cereals? 

What  is  the  best  selling  breakfast  food? 

What  appeals  most  to  the  customer? 

Does  the  customer  ask  for  breakfast  food  by  name? 

How  much  breakfast  food  do  you  sell  a  week? 

WTiat  percent  of  your  customers  buy 

Biilk  Rolled  Oats Package  Oats 


What  style  of  manufacturers'  advertising  is  most  helpful  to  you  in 
creating  sales? 

Will  you  co-operate  with  a  manufacturer  of  a  breakfast  food  who  will 
advertise  in  the  Journal? 

In  what   Milwaukee  newspaper  would  you  recommend  a  manufac- 
turer to  advertise  to  produce  best  results  for  you? 

General  Remark : — 

Fig.  7. — Questionnaire  used  in  Field  Survey. — (Milwaukee  Journal.) 


METHODS  OF  SECURING  DATA  39 


For  the  White  Goods  Department : 

1.  Do  you  sell  toweling  by  the  yard? 

(a)    Hand  toweling (6)    Roller  toweling 

(c)    Dish  toweling 

2.  What  are  the  present  prices  for  hand  towels  made  of 

(a)    Linen {d)    Cotton  and  linen 

(6)    Crash (e)    Cotton 

(c)    Huckabuck 

3.  What  material  is  the  most  popular? 

4.  Is  there  any  branded  toweling? 

(a)    What  brands? (6)    What  price? 

5.  Are  they  asked  for  by  brand  name? 

6.  Would  you  carry  a  branded  toweling  that  was  locally  advertised? 

7.  WTiat  is  the  average  yardage  sold  to  a  customer? 

8.  Do  you  sell  many  whole  bolts?   If  so,  what  length  are  these  bolts? 

9.  Are  people  making  as  many  towels  as  formerly? 

10.  Do  you  think  that  a  cotton  toweling  like  sample  would  sell  well  at 
30c  a  yard? 

11.  Could  a  demand  be  created  to  sell  it  by  the  bolt?    If  so,  what 
length  should  this  bolt  be? 

12.  Can  you  suggest  any  use  except  towels  for  which  this  material 
would  be  good? 

(a)    Table  nmners (6)    Bureau  tops 

(c)    Etc 

To  the  Household  Linen  Department. 

1 .  What  kind  of  towels  do  j^ou  carry?     Sizes?     Prices? 

2.  Which  is  your  best  seller? 

3.  Are  you  selling  more  Turkish  towels  than  formerly? 

4.  Is  the  small  guest  Turkish  towel  popular  ?     Why? 

5.  Is  there  any  branded  towel? 

6.  Is  it  well  known  to  your  trade? 

7.  What  is  the  average  purchase  of  towels?    12,  6,  4,  2  ? 

8.  Could  branded  towels  be  sold  (with  adequate  advertising)  if  they 
were  packaged  in  sealed,  antisei^tic  containers,  a  dozen  to  a 
package? 

9.  To  what,  in  your  estimation,  does  the  linen  towel — as  compared 
with  cotton — owe  its  popularity? 

(a)    Greater  absorbency {d)    Housewife  tradition.. .  . 

(6)    Longer  life {e)     

(c)    Greater  weight (/)     

Fig.  8. — Special  Questionnaire  for  Department  Stores. 


40  MARKET  ANALYSIS 

tion  of  successful  interviews  should  be  credited  more  to  the  clever- 
ness and  resourcefulness  of  the  newspaper  man  than  to  that  of 
the  celebrity  whose  name  appears  in  the  headline.  But  inter- 
views of  this  sort  are  a  menace  in  commercial  research  work. 

Fig.  8  shows  sample  questionnaires  submitted  by  an  inter- 
viewer to  department  stores.  It  is  interesting  to  note  that  in 
this  case  it  was  important  to  secure  the  opinions  of  two  separate 
departments  in  the  store. 

Requisites  of  the  Interviewer.  The  type  of  interviewer 
required  will  vary  somewhat  with  the  character  of  the  people 
he  is  interviewing.  It  will  not  take  a  man  of  very  high  calibre 
to  interview  grocery  stores;  but  it  most  decidedly  will  be  of 
importance  to  have  a  good  man  to  meet  high  business  executives 
and  discuss  matters  of  business  policy. 

Under  ordinary  circumstances  the  best  investigator  is  not  the 
mechanical  recorder,  but  the  man  who  can  observe  as  well.  He 
should  have  a  background  of  information  upon  the  subject  which 
he  is  investigating.  Otherwise  he  will  find  difficulty  in  getting 
anyone  to  discuss  the  questions  with  him. 

The  interviewer  should  know  how  to  approach  the  persons 
whom  he  intends  to  question.  In  some  cases,  the  question- 
naire will  obtain  an  entree  where  a  second-rate  interviewer 
could  not.  An  interviewer  who  is  also  an  expert  is  welcome 
almost  anywhere.  This  does  not  mean  to  imply  that  the  sur- 
veyor himself  should  do  the  interviewing.  It  does  mean,  however, 
that  an  inteUigent  interviewer  is  a  great  asset. 

The  interviewer  should  be  tactful.  Frequently  he  will 
encounter  coolness  and  even  antagonism.  This  may  be  due 
merely  to  an  aversion  to  imparting  information,  or  it  may  be 
due  to  some  preconceived  prejudice  against  the  company  he 
represents.  He  should  know  how  to  meet  people  and  to  make 
them  regard  him  with  liking. 

It  may  be  very  difficult  for  the  interviewer  to  make  notes 
during  the  conversation.  The  fear  of  being  quoted  may  prevent 
outspokenness,  and  many  people  are  not  at  ease  while  their 
words  are  being  recorded  on  paper.  The  interviewer  must 
be  chosen  with  regard  to  his  having  a  good  memory. 

Salesmen  as  Data  Collectors.  Theoretically,  the  salesman  is 
the  best  link  between  the  company  and  the  trade,  and  should 


METHODS  OF  SECURING  DATA  41 

be  of  considerable  aid  in  compiling  reports.  In  practice,  however, 
it  has  been  found  that  the  best  "  reporters  "  are  not  the  best 
sellers.  It  is  not  the  salesman's  business  to  ferret  out  pertinent 
and  impertinent  facts,  but  to  sell  his  company's  goods.     Many 

SALESMANS     REPORT 

NAME  jf  hv  .  (P-cyxcC' DATE        ^//hl/— 

ADDfiESS  nLcL^dcA-^cn^.  ACCOUNT  NO.      _Z)  /32 

^=='^^'=^      ="°        THE    MAN  p  1        °~ 

AGE      ^O  MARRIED    ^H£A/  CHILDREN        3 CHURCH  ClUccf^U^    QPc^uLt.'JLX^ 

. ^  ^  - 

OWN  REAL  .ESTATE      yca HOME     -y^^         BUILPrNO     Ko        OTHER  INTERESTS       >U> 

FIRE  INSURANCE         ^  Jo.  eoo LIFE  INSURANCE      ^ /S.OOO. 

PERSONALITY       PA'Pt.ca^ EXPERIENCE  /2  ■^f^AM  C'^M^  Ax^^^mMa)  STANDING    PtycrzO 


PRINCIPAL  CREDITORS    i^^>^uXk-^CXayU6   —  MoMArz/if' ^  Cv-  ^mK  J^-ouii- /latirxMZ- 

THE    TOWN  D 

SIZE  OF  TOWN    ■S'ooo PROGRESSIVE      y^ CLASS  OF  TRADE  CUr(2e^  -  Uj<^;aL>^. 

RURAL  ROUTES     -<ag/i/<^^  NEWSPAPERS     iLuLL^  NEAREST  CITY    CfLu_,a^  - 

WHAT  INDUSTRIES   J-UA/yuXUnj-' 'fcLci^nM ,    Wn^yi^  >yU£i',   '^l^xxJlyi.oTuJ^  ■<i-fi<ri'-^ ■ 

"^  '    THE    BUSINESS 

STORE  LOCATION      C^rVyUjyn^ KIND     Cc^cc^ajL SIZE     So  X  /oo 

VALUE  STOCK    •$  ^O,  OOP  VOLUME  S  /ZO,  OOP PRICES  MARKED     -CiTcSl^ 


STOCK  DISPLAYED 


■f-QjtAy CONDITION   iCc^   <i^nvM-  trCeL    -O^fcj^. 

FRONT     fr^!g6  ^g^fciA- INTERIOR    >tWi!/t/w WINDOWS       C^rtrzO 


ADVERTISER        cryQcmu-erv^aJ^ COMPETITION 


JoJ^ 


OUR    INTERESTS 

HOW  LONG  HAS  HE  CARRIED  OUR  LINE?  Z  'HcoJiy^     WHAT  COMPETING  LINES?      L^  /  

BEST  SELLER      L^    T CREDIT 

HIS  COMPLAINTS    ^^^^ii/^"    <^  £oi>r<A^  -^^T/cpt^/Vt/t/t^Ldyn^  -fir^  ''T'CU-f.n^ax^ei^    /fca-rt!k^ 

REMARKS         Ktni^  <u,.^tLx^^^f^.  jiio   -/nXHiA,  <«-Ao  ^dMliaL  zJit-  -^rU-a^c^ttjJ^    < 


Fig.  9. 


companies  regard  it  as  a  hopeless  undertaking  to  attempt  train- 
ing the  salesman  to  furnish  any  helpful  information. 

The  sales-promotion  manager  of  the  Greenfield  Tap  &   l^ic 
Corporation,   as  reported   in    P/-mfer.s'   Ink  Monthly,   has  made 


42  MARKET  ANALYSIS 

up  a  vcrv'  careful  list  of  information  desirable  for  the  salesman 
to  get,  and  has  then  proceeded  to  fill  in  every  possible  item 
before  handing  it  to  the  salesman.  Then,  all  the  salesman  has  to 
do  is  to  check  off  on  the  report  what  he  finds  out.  On  the  basis 
of  information  received  from  these  cards,  the  home  division  of 
research  and  records  carries  on  its  work  of  market  analysis. 

Fig.  9  is  a  form  got  up  by  the  Hammermill  Bond  Company 
for  salesmen's  reports.  This  is  arranged  to  give  information  about 
the  customer,  the  town  he  lives  in,  his  business,  and  the  compe- 
tition, with  space  for  general  remarks. 

General  Conclusions.  Securing  data  necessitates  a  large 
amount  of  detail  work.  Wherever  possible,  this  should  be 
delegated  to  an  assistant.  An  assistant,  for  example,  should 
look  after  the  routine  interviewing,  the  acknowledgment  of 
questionnaires,  letters,  etc.,  superintend  filing,  prepare  mailing 
lists,  or  lists  of  people  to  call  upon.  It  means  a  great  deal  both 
to  the  surveyor  and  the  quality  of  his  work  to  be  reheved  of  these 
matters. 

The  choice  of  interview  or  questionnaire  as  a  means  of  elicit- 
ing information  is  in  many  cases  determined  by  expediency,  that 
is,  the  time  and  money  available  for  the  survey.  Where  the 
surveyor  may  exercise  his  own  discretion,  he  should  consider 
the  purpose  for  which  the  material  is  needed,  and  which  method 
will  be  the  most  efficient  and  adequate  to  obtain  the  desired 
information.  Generally  speaking,  the  interview  is  the  preferred 
form,  but  in  cases  where  the  interest  is  certain  and,  therefore, 
results  as  sure  as  can  be,  the  questionnaire  may  be  a  much  quicker 
and  more  satisfactory  method. 


CHAPTER  III 
ASSEMBLING  AND  ANALYZING  DATA 

Outline 

What  method  should  be  used  in  assembling  the  data? 
(a)    When  should  it  be  assembled? 

(1)  As  it  comes  in? 

(2)  After  aU  repUes  have  been  received? 

(6)    How  should  results  be  tabulated  and  filed? 

(1)  Will  a  loose-leaf  note  book  system  be  adequate? 

(2)  How  shall  information  be  classified? 

(a)    Under  name  of  authority? 
(6)    Under  topic? 

(3)  What  is  the  value  of  a  card  system  in  this  survey? 

(a)  Will  not  a  mailing  list  be  more  practicable  for  ques- 
tionnaires? 

(6)  What  is  the  permanence  of  the  work?  Will  cards 
prove  valuable  later  to  the  company? 

(c)  Will  not  a  card  system  be  helpful  to  the  surveyor 
in  making  outline  of  final  report? 

(c)    How  should  results  be  classified  for  analysis? 

(1)    What  are  the  advantages  of  the  recapitulation  sheet? 

(a)  Checksupadequacy  of  answers. 

(b)  Information  in  tabloid  form  for  analysis. 

(c)  Makes  it  easier  to  draw  conclusions. 

How  should  the  data  be  analyzed? 

(a)    How  may  the  different  sorts  of  answers  to  questions  be  classified? 

(1)  Yes  and  No  answers. 

(a)  How  many  answers  required  to  make  results  authori- 
tative? 

(1)    On  what  does  this  depend? 

(a)    The  size  of  the  audience? 

(6)    The  character  of  the  audience? 

(c)    Other  considerations? 

(2)  Numerical  answers. 

(a)    What  answers  should  be  rejected? 

(1)    The  obviously  impossible,  etc. 

43 


44  MARKET  ANALYSIS 

(3)  The  categorical  answer. 

(a)    Their  value  in  obtaining  definite  results. 

(4)  Opinions. 

(a)    Generally  of  two  kinds: 

(1)  Those  which  may  be  classified  numerically. 

(2)  General  expressions  of  opinion. 

(a)  So   authoritative  that  they  must  be 
quoted  verbatim. 

(b)  A   digest   made  of   the  consensus   of 
opinion . 

What  should  be  the  surveyor's  policy  in  acknowledging  correspondence? 

(a)  Does  the  communication  require  acknowledgment? 

(1)  May  need  further  information. 

(2)  May  lead  to  new  business  for  the  company. 

(3)  May  be  a  matter  of  courtesy. 

What  are  the  factors  making  against  accuracy  in  estimating? 

(o)    Error. 

(1)  Is  it  compensating? 

(2)  Is  it  cumulative? 

(b)  Bias. 

(1)    Is  it  intentional  or  unintentional? 

How  did  the  surveyor  obtain  data  for  estimates? 
(a)    How  authoritative  should  they  be? 

(1)  His  own  figures. 

(2)  The  figures  of  others. 

How  should  statistics  be  used? 

(a)    Desirability  of  having  calculations  as  simple  as  possible. 
(1)    The  statistical  forms, 
(o)    The  average 

Arithmetic  mean 
Weighted  average. 
Index  number. 
(6)    The  median. 

(c)  The  mode 

(d)  Other  methods. 


CHAPTER  III 
ASSEMBLING  AND   ANALYZING  DATA 

Many  people  can  procure  facts,  or  can  be  trained  to  do  so, 
but  few  have  the  faculty  for  analyzing  and  interpreting  them. 
It  takes  a  different  set  of  qualifications  to  sit  down  before  a  mass 
of  material  and  from  it  pick  out  the  pertinent  data,  and  to  arrange 
them  in  such  form  that  the  business  executive  can  readily  grasp 
their  meaning.  Yet  the  fact  that  it  requires  a  different  type  of 
mind  to  analyze  findings  should  offer  no  serious  obstacle,  since 
there  are  few  business  men  who  have  not  associates  upon  whom 
they  may  call  for  this  task.  It  is  safe  to  say  that  no  market 
analysis  should  be  a  "  one-man  job."  The  risk  of  becoming  biased 
is  too  great. 

The  assembling  of  the  data  will  afford  a  good  test  of  the 
adequacy  of  the  preliminary  planning.  Of  course,  during  the 
investigation,  opportunities  will  have  occurred  for  collecting 
exceedingly  valuable  information  not  previously  provided  for; 
but  the  main  exhibit  of  evidence  will  be  the  result  of  careful 
advance  preparation  in  writing  questionnaires,  arranging  inter- 
views, and  consulting  bibliographical  sources. 

When  all  the  material  is  collected,  it  must  be  analyzed. 
Meaning  must  be  derived  from  the  mass  of  figures,  the  variant 
shades  of  opinion,  and  the  positive  but  opposite  "  Yes's  "  and 
"  No's."  It  may  well  be  that  important  decisions  depend  on  the 
accurate  interpretation  of  all  these  factors  in  relation  to  each  other, 
and  the  investigator  must  sit  in  judgment  on  them,  throwing 
out  this,  qualifying  that,  and  coordinating  the  whole. 

Assembling  the  Data.  When  replies  to  questionnaires  are 
coming  in,  when  interviews  arc  reported,  or  when  a  large  mass 
of  miscellaneous  information  is  collecting,  is  the  time  when  the 
value  of  the  filing  and  entering  system  will  be  tested.  It  is  not 
an  easy  task  to  file  away  answers  and  interviews,  where  there 
is  such  diversity  in  the  character  of  the  information. 

45 


46  MARKET  ANALYSIS 

A  safe  nile  to  follow  is  always  to  put  the  information  into 
written  form  as  soon  as  it  is  obtained.  If  the  investigator  talks 
to  this  person  and  then  to  that  person,  or  reads  this  book  and 
then  that  book,  and  then  entrusts  these  findings  merely  to  his 
memoiy,  the  results  will  not  be  satisfactory. 

One  method  which  has  been  found  fairly  adequate  is  a  loose- 
leaf  note-book  system.  As  material  comes  in,  it  may  be  put  in 
its  allotted  place,  under  the  product,  the  industry,  merchandising, 
etc.  No  particular  arrangement  can  be  suggested  since  the  sub- 
ject matter  of  every  investigation  is  so  different.  The  surveyor 
must  make  his  own  classification  of  headings. 

No  matter  how  systematic  and  methodical  he  may  be,  he 
will  find  that  certain  sources  will  not  yield  the  information 
expected,  yet  may  yield  material  of  value  elsewhere  in  the  inves- 
tigation. For  example,  if  he  goes  to  interview  an  engineer  on 
alternative  methods  of  constructing  a  diving  helmet,  he  may 
get  information  on  new  fields  for  the  marketing  of  diving  apparatus 
instead  of  the  technical  information  he  expected.  It  is  the 
unexpected  findings  that  often  prove  of  most  value. 

If  he  goes  to  see  a  customer,  he  will  be  given  ideas  on  all  sorts 
of  subjects.  Then  the  problem  arises  of  whether  the  total  interview 
shall  be  classified  in  its  entirety  under  the  customer's  name  or 
whether  it  shall  be  split  up  according  to  the  subject  matter  and 
scattered  through  the  report.  No  set  rule  can  be  estabHshed 
on  this  point,  both  plans  being  followed. 

In  assembling  data,  it  is  usual  to  find  that  some  topics  will 
fill  out  with  evidence  and  material  more  readily  than  others. 
The  advantage  of  assembling  all  material  as  it  comes  in  is  that 
it  allows  the  investigator  to  observe  where  he  has  obtained  enough 
information  and  where  it  will  be  necessary  to  get  additional  facts. 

It  is  highly  desirable  to  make  an  outUne  of  the  report  before 
matters  have  progressed  far.  This  should  be  most  carefully 
thought  out,  and  adapted  to  the  particular  business.  As  a  matter 
of  fact,  if  the  preliminary  survey  has  been  made  with  any  degree 
of  thoroughness,  it  may  serve  as  a  guide  for  the  final  outline, 
although  doubtless  there  \\all  be  certain  modifications. 

Card  Systems.  The  value  of  card  systems  has  been  proved 
already  in  many  lines  of  business.  There  is  doubt,  however, 
as  to  the  extent  to  which  they  may  be  applied  in  market  analysis. 


ASSEMBLING  AND  ANALYZING  DATA 


47 


It  has  been  found  impracticable,  without  too  great  expense  and 
effort,  to  make  use  of  cards  throughout  the  entire  investigation. 
It  is  obviously  fooHsh  to  make  cards  for  every  person  to  whom 
a  questionnaire  is  sent,  80%  of  whom,  perhaps,  will  never  reply. 
For  that  portion  of  the  work  maihng  hsts  are  more  serviceable. 


Letter  No 

Questionnaire  No. 
Investigation  No.. 


Rate  sent 

No.  sent  out 

No.  replies 

Percentage  replies . 


Name 

Address 

Date  of 
Reply 

Date  of 
Acknowledgment 

Acknowledgment 

Form 

Letter  No. 

Remarks 

1 

2 

3 

4 

5 

6 

7 

8 

9 

Fig.  10. — Convenient  form  of  Mailing  List. 


See  Fig.  10  for  one  convenient  form.  The  information  may  be 
checked  off  on  these  as  repHes  are  received,  and  other  entries 
made  as  shown. 

As  far  as  the  percentage  of  replies  is  concerned,  the  value 
of  a  card  system  depends  on  the  permanence  of  the  work.  If  it 
is  intended  that  a  large  proportion  of  the   persons  addressed 


48 


MARKET  ANALYSIS 


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49 


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60  MARKET  ANALYSIS 

are  to  become  prospective  customers  or  followed  up  for  some 
other  reason,  a  card  system  is,  of  course,  desirable.  It  eliminates, 
for  example,  the  necessity  of  keeping  copies  of  circular  letters, 
since  it  is  simply  necessary  to  set  down  on  the  card  that  Letter 
No.  Blank  has  been  sent  on  such-and-such  a  date.  In  similar 
fashion,  the  results  of  interviews  may  be  noted  briefly  on  the  card, 
if  a  form  questionnaire  is  not' used. 

In  addition  to  the  service  a  card  system  may  render  as  a  mail- 
ing list,  it  is  most  valuable  in  assembling  data,  and  in  the  actual 
making  up  of  the  final  report.  Being  extremely  flexible,  it  per- 
mits rearrangement  of  topics  in  any  order  desired.  It  is  a  very- 
cheap,  easy,  and  practical  way  of  sandwiching  in  facts,  figures,  or 
ideas.  Generally  speaking,  each  idea  should  go  on  a  separate 
card,  and  guide  cards  used  to  mark  the  more  important  divisions. 

As  to  the  size  of  the  card,  the  3"x  5"  is  good  because  of  the 
ease  with  which  it  may  be  slipped  into  the  pocket.  Since  this  size 
of  card  is  too  small  to  permit  any  great  amount  of  information,  if 
there  is  occasion  to  write  at  length  on  that  subject,  it  is  better  to 
do  so  on  a  sheet  of  letter-size  paper.  This  sheet  can  be  given  a 
number  to  correspond  with  a  similar  nmnber  on  the  card,  and 
each  is  then  filed  away  in  its  place.  When  there  is  need  for  the 
record,  it  is  a  simple  matter  to  look  up  the  card,  get  the  number 
and  find  the  sheet  referred  to,  which  will  be  filed  numerically. 

The  Recapitulation  Sheet.  On  the  recapitulation  sheet  are 
entered  the  results  of  questionnaires,  and  perhaps  interviews. 
The  form  should  be  prepared  before  repUes  commence  to  come 
in.  Indeed,  there  are  many  advantages  in  making  up  the 
recapitulation  sheet  at  the  same  time  as  the  questionnaire.  In 
that  way,  a  check  may  be  had  on  the  adequacy  of  the  information 
sought,  while  any  lapses  or  gaps  in  the  questionnaire  often  can 
be  detected  by  that  means. 

Whether  answers  should  be  entered  immediately  upon 
receipt,  or  whether  the  investigator  should  wait  until  most  of  the 
repHes  are  in,  depends  a  great  deal  upon  clerical  help  avail- 
able, and  on  how  much  haste  there  is  to  get  it  finished.  In  some 
cases,  as  soon  as  the  desired  number  of  repUes  have  arrived,  they 
are  entered  and  classified. 

Probably  not  until  the  data  are  to  some  extent  sorted  out  will  it 
be  possible  to  determine  positively  whether  the  search  has  been 


ASSEMBLING  AND  ANALYZING  DATA  51 

comprehensive  enough.  The  investigator  ought  never  to  hesi- 
tate, even  after  recapitulations  are  completed,  to  ask  himself 
whether  he  has  enough  facts  to  justify  drawing  conclusions  from 
them.  In  actual  practice,  it  is  frequently  necessary  to  go  out 
into  the  field  and  get  additional  facts,  especially  as  the  most  vital 
ones  are  in  many  cases  the  hardest  to  corroborate. 

Fig.  11  gives  an  example  of  a  recapitulation  sheet  prepared 
by  the  Fishing  Gazette,  in  one  of  its  surveys.  Here  answers  are 
divided  geographically,  since  the  opinion  in  various  parts  of  the 
country  differed  in  many  cases. 

"  Yes-and-No  "  Answers.  Yes-and-no  answers  are  the  sim- 
plest to  classify.  If  one  hundred  replies  are  received  from 
women  who  have  been  asked  whether  or  not  they  buy  goods  by 
trade  name,  it  is  easy  enough  to  say  that  such-and-such  a  per- 
centage do  and  that  the  remainder  do  not. 

As  an  example  of  the  value  of  results,  the  following  were 
obtained  by  the  Eclipse  Manufacturing  Company.  The  question 
was:    Do  you  sell  auto  accessories  or  tires? 

Yes 1049 

No 544 

Percentage  selling  accessories,  65.8%. 

This  was  very  important  information  as  regarded  outlets  for 
automobile  accessories  through  other  than  accessory  stores.  In 
addition  it  was  asked  whether  this  was  a  growing  line. 

Yes 1003 

No 159 

Percentage  of  growing  lines  86.3%. 

In  the  first  instance  the  number  of  Yes's  is  not  overwhelming, 
but  the  results  of  the  rephes  to  the  second  question  leave  no 
doubt  as  to  the  weight  of  opinion. 

The  question  of  importance  here,  as  is  the  case  with  all 
answers  to  a  questionnaire,  is  how  many  replies  are  necessary  to 
make  results  authoritative.  This  number  varies  with  almost 
every  investigation  and,  in  fact,  with  every  questionnaire  or 
group  of  interviews.  It  depends  first  and  foremost  upon  the 
size  of  the  audience.     Usually  experts  on  a  subject  will  be  small 


52  MARKET  ANALYSIS 

in  number  and  replies,  though  few,  will  carry  much  weight. 
Dealers  will  be  much  more  numerous,  and  it  will  depend  on  their 
number,  their  geograpliical  distribution,  the  comparative  stocks 
carried,  etc.  The  factors  in  the  case  of  the  ultimate  consumer 
are  even  more  comphcated.  Obviously,  if  three  people  answered, 
two  of  whom  said  Yes  and  the  other  No,  no  weight  of  opinion 
could  be  recorded.  There  must  be  a  minimum  number  of  replies 
to  lend  authority  and  accuracy  to  the  results.  This  minimum 
number  cannot  be  arbitrarily  set,  but  must  be  determined  by  the 
investigator  in  accordance  with  the  particular  conditions. 

Numerical  Answers.  Classifying  numerical  answers  is  more 
difficult  since  the  element  of  error  is  likely  to  be  greater.  In  the 
Yes-and-No  type  of  answer,  the  person  had  to  state  either  one  of 
two  things  which  were  true  in  his  opinion.  But  if  you  ask  in  the 
questionnaire  how  many  times  a  year  he  uses  an  article  or  how 
often  he  visits  Chicago  (see  Fig.  12),  or  how  many  times  a  day 
he  smokes,  obviously  it  is  largely  a  matter  of  guesswork  on  the 
part  of  the  person  answering.  Some  persons  guess  better  than 
others;  but  on  the  whole  the  people  who  guess  too  much  and  those 
who  guess  too  little  are  supposed  to  coimterbalance  each  other. 

Certain  answers,  however,  ought  always  to  be  thrown  out. 
For  instance,  some  will  report  zero  number  of  times,  when  this  is, 
on  the  face  of  it,  an  impossibiKty.  Other  answers  will  set  a  figure 
far  above  what  it  could  possibly  be.  It  is  not  safe  to  include  such 
extremes.  Although  errors  ordinarily  compensate  each  other, 
yet  where  there  is  obvious  divergence  from  fact,  it  is  better  to 
cast  the  results  out  altogether.  The  difficulty  lies  in  deciding 
where  to  draw  the  line.  If  there  is  any  doubt  about  it,  the  best 
thing  to  do  is  to  reject  it.  However,  it  is  a  safe  precaution  to 
look  through  the  rejections  afterward  and  see  whether  there  is 
any  great  amount  of  agreement  in  seemingly  absurd  answers. 

Categorical  Answers.  What  do  specific  answers  show?  In 
many  cases,  direct  questions  are  asked  as,  for  example,  those 
given  in  Fig.  12,  made  by  the  Chicago  Tribune  in  its  analysis 
of  the  Iowa  market.  The  question  did  not  leave  to  the  imagina- 
tion of  the  recipient  of  the  questionnaire  just  what  he  or  she 
bought,  but  enumerated  specific  articles,  shoes,  furniture,  autos, 
etc.  This  provided  an  excellent  index  to  show  what  out-of-town 
shoppers  bought  in  Chicago.     It  is  interesting  to  note  that  on 


ASSEMBLING  AND  ANALYZING  DATA 


53 


the  same  sheet  is  given  the  authority  for  the  figures,  that  is, 
the  number  of  questionnaires  sent  out,  their  destination,  and  the 
number  of  repHes  received. 


Man- 

Vin- 

chester, 

ton, 

Iowa 

Iowa 

200 

121 

68 

30 

25 

22 

9 

1 

19 

3 

5 

1 

26 

11 

32 

12 

17 

6 

25 

7 

18 

9 

4 

5 

19 

8 

6 

3 

3 

3 

13 

3 

14 

3 

9 

2 

19 

9 

Total 


Questionnaires  Mailed 

Answers  Received 

How  often  do  you  visit  Chicago? 

Once  or  more  a  year 

Once  in  2  years 

Seldom 

Never 

What    have    you    bought    on    tn,sits    to 

Chicago? 

Men's  Clothing 

Women's  Clothing 

Children's  Clothing 

Shoes 

Furniture 

Musical  Instruments 

Rugs  and  Carpets 

Autos 

Trucks 

Office  Equipment 

Books 

Trunks  and  Suitcases 

Sporting  Goods 

Confectionery 


448 
151 


39 
9 


33 

38 

18 

25 

23 

9 

15 

6 

1 

13 

21 

10 

15 

25 


86 

10 

31 

6 


70 
82 
41 
57 
50 
18 
42 
15 
1 
19 
37 
27 
26 
53 


Fig.    12. — Recapitulation    Sheet    illustrating    Numerical    and    Categorical 
Answers. — (Chicago  Tribune.) 


Fig.  13,  from  the  same  Iowa  survey,  shows  how  a  specific 
answer  as  to  what  magazines  or  papers  are  read  allowed  the 
Chicago  Tribune  not  only  to  estimate  the  extent  to  which  its  own 
publication  was  read,  but  also  the  strength  of  rival  publications. 


54 


MARKET  ANALYSIS 


It  may  be  said  that  the  categorical  answer  is  the  most  valu- 
able, although,  in  general,  it  is  the  hardest  to  obtain  in  many- 
cases.  It  is  the  old  story  of  people  dislildng  to  commit  them- 
selves to  anything  definite. 

Fig.  14  shows  how  the  categorical  form  was  used  in  tabulating 
the  order  of  sales  of  the  different  cleansers  handled  by  dealers. 


Data  obtained  from  Iowa 
Questionnaire 


NtWSPAPLRS  AND  MACA- 

ZINLS  RLAD  BY  TRIBUNE 

SUBSCRIBERS 


Questionnaires  Mailed  .  . 
Answers  Received     .     .     . 

Saturday  Lvening  Post  .  . 
.Ladies  Home  Journal  .  . 
Literary  Digest     .... 

American 

National  Geographic  .  . 
Women's  Home  Companion 
Good  Housekeeping  .  . 
Review  of  Reviews    ... 

Delineator 

Collier's 

Pictorial  Review  .... 

Atlantic 

Harper's 

McClure's 

Youth's  Companion .     .     . 

Outlook 

McCall's 

Leslie's , 

Cosmopolitan 

Century      ...... 

E-vcrybody's    .     ,     .     .     , 
World's  Work      .... 

Popular  Mechanics  ,  .  . 
Scientific  American  .  .  . 
Women's  World  .... 

Vogue 

Metropolitan 

Hearst's      ...... 

Local  Papers 

Farm  Publications     . 
Religious  Publications    .     . 
New  York  Papers     .     .     . 
Other  Chicago  Papers    .     . 

TRIBUNE,    . 


2  ... 

3  1 
3  ... 

'.'.'.  "i 

3  ... 

2  ... 

...  1 

...  2 

i  '.'.'. 


Chicago 

DaUy 

Tribune 

$187,288 

Kcribner-s  j  |2,40e 

Brcfdprs'  Ga-^ctlc  ♦  I0.992 

Tarm  Journal  tlJ.iss 

Successful  Farmingti6.t)i 

Weedlecraft  *2£>ii9 

Christian  Hcrild  »i2,lfc2 

Hearsts  »24.443 

Good  Housekeeping  t£C<.il 

C  osmopoVxtan 

Sunday 
TVibunc 

$263,025 

Colliers 

Ladies' 
Home  Journal 

Saturday 
Evcnin<  Post 

$114-';85£ 

Fig.  13. — Recapitulation  Sheet,  showing  tabulation  of  replies.     Results  are 
shown  both  graphically  and  numerically. — (Chicago  Tribune.) 


Opinions.  How  shall  opinions  be  treated?  In  addition  to  the 
Yes-and-No  answers,  and  the  numerical  answers,  there  will  be  a 
certain  number  of  general  answers,  setting  forth  reasons  why 
articles  are  liked,  motives  for  purchase,  etc.  There  is  usually 
enough  similarity  in  them  for  classification. 

If  the  questionnaire  makes  any  allowance  for  general  expres- 
sions of  opinion,  these  will  have  to  be  handled  in  a  different  way. 


ASSEMBLING  AND  ANALYZING  DATA 


55 


(1)  One  alternative  is  to  pick  out  the  opinions  which  reach 
similar  conclusions,  and  classify  them  mmaerically.  Care  must 
be  used  to  classify  together  only  those  opinions  the  authors  of 
which  belong  to  the  same  class.  It  will  not  do  to  classify  the 
opinions  of  experts  with  those  of  dealers  or  of  consumers.  The 
first  opinion  is  rendered  from  a  theoretical  viewpoint,  the  second 
from  a  selling  viewpoint,  and  the  third  from  that  of  the  user. 


Brand   Name 

Order   op  Sale 

1 

St         2d 

3d 

4th 

5th 

Kitchen  Klenzer 4 

t3           4 

4         37 

1 

1 

1 
1 

1 

10 

4 
3 

2 
2 
2 

1 
1 
1 

1 

1 

5 
1 

1 

2 
1 

Old  Dutch  Cleanser 

1 

Keen  Kleaner 

Light  House  (Armour's) 

Lekko 

Sunbrite  (Swift's) 

1 

Ammo 

Polly  Prim 

Delight 

Babbitt's  Cleanser 

Tubs 

1 

Bon  Ami 

Scourene 

Spotless 

Fig.    14. — Table    showing    popularity    of    various     cleansers    in    Chicago 
Territory. — (Chicago  Tribune.) 


In  one  investigation,  a  group  of  engineers  was  asked  their 
opinions  as  to  the  requisites  of  an  automobile  pump.  A  sur- 
prisingly large  number  answered  that  the  first  requirement  was 
*'  ever-readiness,"  without  this  thought  having  been  even  sug- 
gested by  the  questionnaire.  It  was  easily  possible  to  classify 
these  answers  in  the  order  of  their  numerical  appearance.  See 
Fig.  15.  It  is  only  fair  to  point  out  that  such  a  consensus  of 
opinion  carries  more  weight  than  one  where  the  idea  is  suggested 
to  the  mind  of  the  person  answering. 


56  MARKET  ANALYSIS 

(2)  Many  opinions  will  be  of  such  a  nature  that  it  may  seem 
desirable  to  present  them  almost  verbatim  under  the  name  of 
the  person  expressing  them.  This  may  be  because  of  the  intrin- 
sic merit  of  the  criticism  or  opinion,  or  it  may  be  because  of  the 

Views  of  Engineers  on  Pumps 


Characteristics  of  Hand  Tire  Pumps.  The  chart  below  shows  the 
relative  importance  of  merits,  as  tabulated  from  a  vote  taken  among 
automotive  engineers. 

Ever-readiness  (not  getting  out  of  order) 

Ease  of  operation. 

Efficiency 

Durability . 

Compactness 

Hose  and  couplings  non-leakable 

Broad  base 

Simplicity , 

Long  stroke .^ 

Weight  minimum 


The  Particular  Type  of  Pump.  About  75%  of  the  engineers  expressed 
themselves  as  preferring  the  compound  pump — that  is,  the  two-cylinder 
(or  even,  in  some  cases,  the  three-cylinder)  as  opposed  to  the  simple 
single-barrel  affair.  A  number  state  their  belief  that  there  is  httle  to 
choose  between  the  various  types,  providing  thay  are  well  made. 


(3 


Engine- Driven  Pumps.  The  unshaded  por- 
tion of  the  polar  chart  represents  the  percent- 
age of  automotive  engineers  who  are  disposed 
to  believe  that  on  cars  costing  over  $1500  the 
engine-driven  pump  will  supersede  the  hand 
pump. 


Fig.  15. — Tabulation  of  opinion. 

prominence  of  the  authority.  General  opinions  are  frequently 
valuable  in  that  they  may  bring  to  light  hints  and  suggestions 
which  had  not  previously  occurred  to  anyone  in  the  organization. 
Opinions  are  of  most  value,  of  course,  when  their  authors  are 
experts  on  the  subject.     Frequently,  the  results  of  special  letters 


ASSEMBLING  AND  ANALYZING  DATA  57 

will  have  to  be  placed  as  a  separate  exhibit  because  of  the  impor- 
tance of  the  author's  name  as  applied  to  the  opinion. 

As  stated  before,  opinions  are  only  valuable  in  relation  to 
the  amount  of  authority  the  person  expressing  them  is  endowed 
with.  The  technical  expert  is  an  authority  on  his  own  subject, 
but  his  opinions  may  be  of  little  value  on  selling.  Again,  the  con- 
sumer may  know  nothing  of  the  materials  entering  into  the 
product,  or  of  the  principles  upon  which  it  is  constructed,  but 
he  may  be  an  authority  on  what  the  average  user  thinks  of  that 
product. 

There  are  some  opinions  which  might  be  valuable  except  for 
the  danger  of  prejudice.  For  instance,  there  are  some  industries 
which  are  decidedly  averse  to  the  introduction  of  improvements 
and  the  opinions  of  members  of  such  industries  would  have  to  be 
taken  with  reservations. 

Acknowledgments.  It  is  a  task  to  keep  track  of  the  corre- 
spondence which  pours  in  during  the  course  of  an  investigation. 
Answers  to  the  majority  of  questionnaires  ordinarily  do  not 
require  acknowledgment.  For  instance,  the  consumer  question- 
naire on  the  face  of  it  does  not  call  for  an  answer.  On  the  other 
hand,  there  are  many  people,  such  as  dealers  and  jobbers,  with 
whom  the  company  may  desire  to  maintain  especially  friendly 
relations,  and  these  should  have  the  courtesy  of  a  reply.  Cus- 
tomers feel  that  interest  is  being  taken  in  them,  and  often  have 
more  confidence  in  the  company  as  the  results  of  the  investigation 
are  made  apparent  to  them. 

It  frequently  happens  that  much  special  information  must 
be  elicited  by  mail.  One  letter  is  not  enough  to  obtain  full 
results,  and  a  series  of  letters  is  necessary.  It  is  not  ordinarily 
worth  while  to  follow  up  people  who  do  not  reply  to  the  first  letter, 
although  in  cases  where  there  is  a  very  limited  number  to  whom 
to  appeal  for  information,  a  follow-up  letter  may  be  valuable. 

An  acknowledgment  may  be  the  only  means  of  thanking 
many  people  for  their  cooperation,  and  this  small  courtesy  may 
be  of  great  help  in  the  event  of  any  future  necessity  for  applying 
to  them. 

Assembling  the  Field  Survey.  Ordinarily,  the  procedure  for 
assembling  data  from  reports  by  field  surveyors  follows  the  same 
method  as  that  for  tabulating  results  from  questionnaires.     As 


58 


MARKET  ANALYSIS 


Popularity  of  Animal  The  unanimous  verdict  of  the  dealer  is 
Fat  as  Against  Nut  that  Animal  Fat  margarines  far  outsell  nut 
Margarine.  margarines. 

The  answers  are: 

Animal  Fat 78 

Nut 8 

50-50 2 

(Animal  Fat  in  Summer — Nut 
in  Winter) 1 

Customers'  Tendency  to  Yes 82 

Ask  for  Butter  Sub-  Sometimes 4 

STITUTES  BY  NaME No 1 

The  above  figures  speak  for  themselves. 
WTien  asked  to  what  they  attributed  this 
only    one    answer    was    received,    "Pub- 
licity." 
Division    op    Consumer        Data   gathered   by   the   Merchandising 
Purchases  as  Regards    Service  Bureau  of  the  Milwaukee  Journal 
Chain  Stores,  Depart-    during  the  past  twelve  months  shows  that 
MENT  Stores  and  Indi-    the  grocery  business  in  Greater  Milwaukee 
viDUALLY  Owned  Gro-    is  divided  as  follows: 

CERIES. 

Individually  owned  groceries.    75% 

Chain  Stores 20% 

Department  Stores 5% 

In  the  case  of  butter  substitutes,  the 

chain     stores'    percentage    is     somewhat 

smaller,  as  it  was  found  that  this  class  of 

store  push  bulk  butter  to  a  considerable 

Manufacturers'         Co-    extent.     Milwaukee  dealers  are  very  em- 

OPERATioN    Producing    phatic  as  to  the  manufacturers'  co-opera- 

THE  Greatest  Results    tion  which  produces  best  results  for  them. 

FOR  Dealers.  Their  choice  follows: 

Local  newspaper  advertising ...  35 
Coupons  (house-to-house  or  news- 
paper)    11 

House-to-house  canvassing 3 

Newspaper  coupons 3 

Demonstration 1 

iViaintain  price 3 

Street  car  cards 1 

Premiums 3 

Sampling 1 

Fig.  16. — Summary  of  Field  Survey  Findings. — (Milwaukee  Journal.) 


ASSEMBLING  AND  ANALYZING  DATA  59 

to  the  number  of  interviews  required  to  make  results  authorita- 
tive, opinions  differ.  In  the  field  survey  which  the  Beech-Nut 
Packing  Company  conducted  for  choosing  a  carton  for  their 
brand  of  macaroni,  investigators  were  sent  to  each  grocery  store 
in  the  city  and  vicinity.  These  investigators  interviewed  from 
15  to  20  individuals  an  hour,  and  about  150  a  day.  In  that 
case,  500  opinions  on  any  one  point  were  judged  authorita- 
tive. 

Field  surveys  are  made  in  considerable  numbers  by  news- 
papers, which  conduct  them  to  show  the  value  of  local  advertising 
to  possible  advertisers.  Field  surveys  are  ordinarily  Umited 
to  practical  analyses  of  the  opinions  of  customers,  either  dealers 
or  consumers.  Fig.  16  shows  how  the  results  of  a  newspaper 
field  survey  are  summarized. 

Error  and  Bias.  The  investigator,  in  his  everlasting  struggle 
for  accuracy,  has  to  contend  chiefly  with  error  and  bias.  Error 
is  usually  classified  as  being  of  two  kinds. 

(1)  Compensating  error.  This  is  the  class  of  error  that 
tends  to  self-correction,  that  is,  as  many  mistakes  are  estimated 
to  be  made  on  one  side  of  the  scale  as  on  the  other,  so  that  the 
two  will  balance  each  other.  Ordinarily,  when  results  are  repre- 
sentative of  the  whole,  the  average  will  show  the  accurate  figure. 
Compensating  errors  are  particularly  apt  to  occur  in  numerical 
replies,  where  the  extreme  numbers  will  tend  to  average  themselves. 

(2)  Cumulative  error.  This  class  of  error  must  be  discovered 
and  allowed  for  if  there  is  to  be  any  sort  of  accuracy  in  results. 
For  instance,  until  the  appearance  of  a  new  census,  government 
statistics  are  based  on  figures  obtained,  in  some  cases,  too  long 
ago  to  be  accurate.  Some  correction  must  be  made  for  this 
inaccuracy.  If  present  figures  are  used  as  a  basis  of  calculation 
and  are  wrong,  then  the  results  will  be  wrong.  Allowance  must 
be  made  for  growth  in  population  and  other  factors.  Fre- 
quently trade  figures  may  be  used  to  check  up  government 
results. 

The  ordinary  case  of  cumulative  error  is  the  short  yard-stick 
or  the  short  measure,  which  make  the  results  cumulatively  more 
erroneous. 

Bias  may  be  intentional  or  unintentional.  It  is  possible  to 
allow  for  the  latter,  as  in  the  case  of  a  company  where  all  members 


60  MARKET  ANALYSIS 

are  prejudiced  in  favor  of,  or  all  against,  certain  policies.  It  is 
much  harder  where  the  attempt  to  change  results  is  deliberate. 
Bias  is  met  with  everywhere.  It  may  be  the  natural  prejudice 
of  the  corner  grocery  store  against  the  more  prosperous  chain 
store,  or  it  may  be  tinged  with  the  bias  of  a  former  customer  with 
fancied  or  real  grievance  against  the  company. 

Estimates  and  Generalizations.  Every  investigator  is  continu- 
ally making  estimates.  He  must  place  the  market  for  his  product 
at  a  certain  number;  he  may  need  to  estimate  the  average  price 
for  it,  or  the  most  popular  size  on  the  market.  In  fact,  esti- 
mating forms  a  large  part  of  his  work. 

Much  of  this  estimating  is  based  on  results  obtained  through 
original  research;  much  also  is  based  on  results  of  the  investiga- 
tions of  others.  It  is  necessary  for  him  to  have  authority  for 
his  own  deductions.  But  it  is  also  necessary  to  examine  the 
authority  for  the  statements  of  others.  People  are  too  prone  to 
take  for  absolute  truth  anything  wTitten  or  printed,  regardless 
of  whether  they  are  familiar  with  the  sources.  But,  as  shown 
previously,  in  the  case  of  the  government  census  report,  allow- 
ance must  be  made  for  changes  in  authorities.  In  fact,  few 
statements  or  figures  advanced  by  other  people,  which  he  adopts 
as  his  own  sources,  are  absolutely  correct  at  the  time  of  his  using 
them.  They  are  too  likely  to  be  out-of-date.  Conditions  change 
so  rapidly  that  it  is  almost  impossible  to  make  anything  abso- 
lutely accurate.  Thus  even  in  accepting  the  estimates  of  others, 
he  may  have  to  make  allowances  for  their  accuracy. 

A  prominent  trade  journal,  in  calculating  the  amount  of  belt- 
ing used  annually  in  the  lumber  industry,  estimated  that  in  a 
steam  driven  sawmill  of  100,000-foot  capacity  in  a  10-hour  run 
approximately  2,270  feet  of  belting  was  needed,  and  repairs  to 
this  approximated  15%  a  year.  In  addition  to  this,  belting  was 
used  in  the  filing  room  with  replacement  of  3%  and  in  the  planing 
room  with  replacement  of  40%.  Using  the  government  figures 
for  sawmills,  this  trade  journal  estimates  there  was  in  use  at  least 
5,710,390  lineal  feet  of  belting,  and  also  that  there  is  1,144,183 
lineal  feet  of  belting  replaced  each  year.  This  only  pretends  to 
be  an  estimate,  yet  it  is  easy  to  see  many  loopholes  for  error  which 
might  put  the  estimate  many  thousand  feet  out  of  the  way. 


ASSEMBLING  AND  ANALYZING  DATA  61 

In  estimating  the  number  of  prospective  customers  for  tobacco, 
the  following  method  was  used  by  the  Milwaukee  Journal: 

Population  (1920)  of  Wisconsin 2,631,839 

Percentage  of  men 50.8% 

Total  men 1,331,710 

Percentage  over  18  years 68% 

Total  prospective  customers  for  tobacco 772,391 

Percentage  of  smokers 91.2% 

Total  smokers 704,420 

Percentage  of  population  of  total  Wisconsin  in 

Milwaukee- Wisconsin  Territory 54% 

Total  population 1,370,000 

Percentage  of  men 50.6% 

Total  men 739,600 

Percentage  over  18  years 58% 

Total  prospective  customers  for  tobacco 399,492 

Percentage  of  smokers 91.2% 

Total  smokers 364,336 

Population  of  Greater  Milwaukee 600,000 

Percentage  of  men 50.6% 

Total  men 303,600 

Percentage  over  18  years 61% 

Total  prospective  customers  of  tobacco 185,196 

Percentage  of  smokers 91.2% 

Total  smokers 168,898 

Accuracy  in  estimation  will  depend  on  two  things:  First, 
whether  the  figures  are  correct,  and  second,  whether  the  judgment 
of  the  surveyor  himself  is  well  balanced.  Under  any  conditions,  an 
estimate  should  not  be  regarded  as  final.  It  is  only  what  to  the 
best  of  the  surveyor's  belief  and  knowledge  of  the  facts  seems  true. 

Methods  of  Statistical  Presentation.  An  understanding  of 
the  elements  of  statistical  method  is  valuable,  although  there  is 
danger  in  becoming  too  technical  in  interpreting  figures  and  facts. 
Yet  when  facts  can  be  marshalled  statistically,  the  result  is 
undeniably  more  convincing.  The  reader  sees  that  these  things 
must  be  so,  because  he  has  the  evidence  before  his  eyes. 

The  arithmetic  mean  is  one  of  the  least  complicated  and  most 
commonly  used  statistical  methods.  It  is  obtained  simply  by 
adding  the  items  in  question  and  dividing  the  total  by  the  number 
of  items  added.     The  result  in  many  cases  will  be  representative 


62  MARKET  ANALYSIS 

of  the  whole.  In  addition  to  its  simpHcity,  this  method  has  the 
advantage  of  showing  the  variation  of  each  factor  from  the 
average.  The  government  uses  this  method  extensively,  and 
particularly  in  obtaining  per  capita  consumption  figures. 

Care  must  be  taken  in  using  the  arithmetic  mean  that  all  the 
items  figured  are  of  the  same  nature;  also  that  there  is  no  exces- 
sive variation  one  way  or  the  other.  If  so,  the  average  would 
not  be  representative.  For  example,  if  the  wages  in  a  company 
were  averaged,  it  would  probably  be  true  that  the  salaries  of  the 
executives  might  outweigh  the  combined  wages  of  the  workmen, 
yet  the  average  remuneration  would  not  take  this  into  con- 
sideration. 

Where  some  items  are  of  much  greater  importance  than 
others,  it  is  better  to  employ  a  modification  of  the  arithmetic 
mean,  such  as  the  weighted  average.  In  this  form,  every  item 
is  multiplied  by  a  factor  which  will  give  it  its  proper  relation  to 
the  other  factors. 

An  index  number,  frequently  used  by  statistical  bureaus, 
is  a  form  of  weighted  average  by  which  such  different  things 
as  wages,  purchasing,  and  sales  may  be  reduced  to  a  common 
denominator.  These  index  numbers  are  commonly  used  to  show 
broad  economic  tendencies  over  a  period  of  time,  such  as  the 
well-known  Bradstreet's  weekly  indexes. 

In  addition  to  these  methods,  there  is  the  median,  which  is 
determined  by  arranging  things  of  the  same  class  in  a  definite 
order  of  progression  and  taking  the  middle  one,  or,  if  there  are 
two  middle  ones,  their  arithmetic  average.  The  common  illus- 
tration of  a  median  is  a  row  of  men  arranged  according  to  height. 
The  middle  man  is  the  median,  and  his  height  will  be  typical  of 
such  a  group.  This  median,  to  be  representative,  must  occur 
at  the  point  of  concentration.  If  the  median  is  radically  dif- 
ferent from  the  surrounding  members  of  the  group,  it  is  not 
representative. 

The  mode  represents  the  greatest  number  of  experiences, 
that  is,  it  is  the  point  of  greatest  concentration  in  a  series  arranged 
according  to  some  particular  standard.  Its  disadvantage  may 
he  in  the  fact  that  there  may  be  more  than  one  point  of  con- 
centration. 

In  using  statistics  of  any  kind,  the  surveyor  should  remember 


ASSEMBLING  AND  ANALYZING  DATA  63 

that  the  purpose  of  statistics  in  market  research  is  to  illustrate 
points  about  markets,  and  not  to  demonstrate  the  surveyor's 
knowledge  of  statistical  method.  The  simplest  form  which  will 
serve  the  purpose  will  in  most  cases  prove  the  best.  In  addition, 
he  should  remember  that  statistics  do  not  take  into  consideration 
the  individual  case,  but  only  the  group.  In  the  final  analysis, 
his  problem  is  individual. 

Conclusions.  In  assembling  and  analyzing  the  data,  the  sur- 
veyor's own  fitness  for  the  work  is  emphasized.  After  all  these  data 
have  been  collected,  what  is  he  going  to  get  out  of  them?  What 
results  is  he  going  to  obtain?  In  what  way  shall  he  classify  all  this 
material  to  bring  out  his  conclusions  in  the  most  logical  and  con- 
vincing fashion? 

The  keynote  of  this  section  of  the  work  is  authority.  Is 
there  enough  definite  and  concrete  weight  of  opinion  so  that 
he  may  conclude  that  such-and-such  a  i-esult  is  sure? 

The  method  of  presentation  will  largely  be  determined  by  the 
method  of  analyzing.  If  the  material  is  not  analyzed  well,  it 
cannot  be  presented  well.  No  excellence  in  style  will  make  up 
for  poorly  assembled  and  analyzed  material. 


CHAPTER  IV 

PRESENTING  THE  DATA 

Outline 

How  should  the  report  be  written? 

A.  What  is  the  function  of  the  outhne? 

1.  To  determine  the  form  of  the  report. 

2.  To  make  the  form  logical  and  convincing. 

B.  What  are  the  fundamentals  of  a  good  report? 

1.  It  should  not  be  too  long. 

2.  It  should  contain 

(a)  A  statement  of  the  plan  of  action. 

(b)  A  list  of  those  interviewed  and  why. 

(c)  A  list  of  those  to  whom  questionnaires  were  sent  and  why. 

(d)  Copies  of  questionnaires  with  results  of  each  one. 

(e)  Authority  for  all  statements. 

3.  It  must  be  impartial. 

C.  How  should  the  report  be  made  attractive? 

1.  The  binding. 

2.  Good  paper. 

3.  Wide  margins. 

4.  A  table  of  contents. 

5.  A  bibhography. 

D.  What  should  be  the  form  of  the  report? 
1.  The  style. 

(o)  Should  be  interesting. 

(b)  Neither  heavy  nor  flippant. 

(c)  Correct  grammar  and  spelling. 

(d)  Written  to  suit  audience. 

(e)  No  superfluous  material,  padding,  etc. 
(/)  No  involved  passages. 

(g)  All  general  statements  should  be  backed  up  by  facts. 
(h)  Wise  to  classify  material  under  frequent  headings. 

How  should  the  report  be  Ulustrated? 

A.  What  are  the  advantages  of  illustrations? 

1.  Figures  more  easily  grasped  in  chart  form  than  in  tables. 

2.  Effect  is  gained  quicker. 

3.  Impression  is  more  lasting. 

64 


ASSEMBLING  AND  ANALYZING  DATA  65 

D.  What  are  the  requisites  of  illustrations? 

1.  Should  be  as  simple  as  possible. 

2.  Each  chart  or  picture  should  be  understandable  in  itself, 
(a)  Wise  to  include  numerical  data  on  chart. 

3.  Advantages  of  color  in  charting. 

4.  Any  unusual  variations  should  be  explained. 

C.  What  are  the  forms  generally  used  in  illustrating  reports? 

1.  Geometrical  forms. 
The  graph. 

The  bar  chart. 
The  circle. 

Other  geometrical  forms  used  to  compare  figures,  tendencies,  ratios, 
etc. 

2.  The  map. 

3.  The  organization  chart. 

4.  Pictures,  photographs,  etc. 

5.  Tables. 

D.  How  should  charts  be  reproduced? 

1.  Blueprinting. 

2.  Photostat. 

3.  Pen  and  ink. 

The  Conclusions. 

A.  What  are  the  requisites  of  the  conclusions? 

1.  Accurate  interpretation  of  facts. 

2.  Concise. 

3.  Brief. 

4.  Impartial. 

B.  Where  should  conclusions  be  placed? 

C.  What  are  the  differences  between  conclusions  and  recommendations? 

1.  A  conclusion  merely  based  on  facts  as  shown  in  survey. 

2.  A  recommendation  is  a  solution  of  difficulties  according  to  personal 

judgment  of  surveyor  or  some  authority. 

D.  The  value  of  interrogatory  suggestions  on  points  not  investigated. 


\V 


CHAPTER   IV 
PRESENTING  THE  DATA 

However  carefully  and  accurately  the  work  of  collecting  the 
data  may  have  been  carried  out,  it  is  the  actual  presentation  of 
that  material  in  readily  understandable  shape  that  will  measure 
its  success.  It  is  not  enough  that  the  surveyor  has  convinced  him- 
self; he  must  convince  his  audience.  He  must  prepare  and  illus- 
trate his  material  in  such  a  way  that  others  will  see  the  conclu- 
sions revealed  by  the  facts.  He  must  keep  in  mind  that  these 
others  have  not  had  his  intimate  contact  with  the  subject. 

Presenting  the  data  divides  itself  into  three  sections,  first, 
writing  the  report;  second,  illustrating  the  report;  and  third, 
formulating  the  conclusions.  The  subject  matter  of  the  investi- 
gation, the  time  allowed  for  the  report,  the  scope  and  the  thor- 
oughness with  which  the  field  has  been  covered,  will  all  exercise 
modifying  tendencies.  The  writer  will  have  to  solve  his  own 
problems  of  arrangement,  illustration,  and  any  other  details 
arising  in  connection  with  this  part  of  the  work.  This  much  he 
should  remember:  that  a  mass  of  details  and  facts,  no  matter 
how  complete  and  excellent,  cannot  make  a  report  good  unless 
these  facts  are  interpreted  and  set  forth  in  conclusions.  Con- 
versely, conclusions  and  charts  are  misleading  without  ample 
data  to  support  them. 

Writing  the  Report.  The  actual  writing  of  the  report  pre- 
supposes an  outline.  It  is  not  possible  for  anyone  short  of  a 
genius  to  sit  down  and  compose  offhand  a  logical,  sequential,  and 
convincing  report  of  the  facts  which  have  been  gathered.  An 
outline  is  necessary.  All  previous  steps  in  the  investigation  sup- 
posedly have  been  leading  up  to  the  writing  of  the  report,  the 
report  being  the  usual  form  of  presenting  the  data. 

No  outline  can  be  so  standardized  as  to  suit  every  investigation. 
For  instance,  surveys  frequently  take  the  form  of  field  analyses 
which  consist  of  a  summary  of  interviews.     Many  newspapers 

66 


PRESENTING  THE  DATA  67 

specializing  in  local  investigations,  the  majority  of  which  are  food 
products,  make  a  practice  of  including  every  report  in  full,  with 
questions  and  answers.  Reports  range  in  scope  all  the  way  up 
the  scale  to  those  which  attempt  to  cover  the  entire  field  of  the 
company's  activities. 

One  outline  used  frequently  in  short  investigations  which  is 
very  simple  yet  effective,  and  possible  of  presentation  in  very 
attractive  style  is  as  follows: 

(1)  A  copy  of  the  questionnaire  or  questionnaires. 

(2)  A  short  description  of  the  purpose  of  the  investigation. 

(3)  Brief  statement  of  how  and  where  answers  were  obtained,  that 
is,  to  whom  questionnaires  were  sent,  how  many 'were  sent,  and 
how  many  repHed. 

(4)  Each  question  taken  up  in  turn,  occupying  perhaps  a  page.  On 
this  page  may  be  put  circle  chart  showing  percentage  of  rephes 
to  that  question,  table  setting  forth  results,  discussion  of  various 
answers  with  any  needed  interpretation,  etc. 

Another  outline  method  for  a  report  was  used  in  a  belting 
survey  of  the  Philadelphia  market. 

(1)  A  description  of  the  city  of  Philadelphia,  and  particularly  its 
industrial  development  with  actual  and  possible  users  of  belting. 

(2)  General  summary  of  the  consumer  end.  The  scope  of  the  survey, 
who  buys  belting,  the  buyers'  knowledge  of  belts,  buying  policies, 
stock  carried,  tendency  towards  different  types  of  transmission 
installation,  etc. 

(3)  The  specific  product,  the  styles,  brand  names,  and  general 
description. 

(4)  The  methods  of  distribution,  particularly  those  of  competitors, 
the  big  competitors,  and  lists  of  the  most  progressive  customers, 
what  gets  new  customers,  what  holds  old  ones. 

(5)  Producers.  The  company  itself,  its  reputation,  business  policies, 
engineering  service,  advertising,  pubhcity,  and  direct  mail  prob- 
lems as  compared  with  other  producers. 

(6)  General  selling  factors,  confidence  in  the  maker,  quality,  dis- 
counts, delivery,  repair  service,  trial  offer  with  guarantee,  sales- 
manship, timeliness  of  salesman's  call,  etc. 

Still  another  type  of  outline  is  the  following,  used  in  the 
investigation  of  an  automobile  accessory: 

(1)  Conclusions. 

(2)  The  extent  of  the  market. 

(3)  The  requirements  of  the  market,  giving  opinions  of  consumers, 

jobbers,  and  engineers. 


68  MARKET  ANALYSIS 

(4)  Competition,  with  lists  of  competitors  and  competing  products, 
with  description  and  price. 

(5)  The  merchandising  problem,  publicity,  distribution,  and  sales. 

(6)  Possible  new  lines  for  the  company  to  manufacture. 

(7)  Additional  equipment  desirable.     An  analysis  of  present  cost  of 
production  with  probable  results  of  other  methods  of  manufacture. 

The  Fundamentals  of  a  Good  Report.  The  report  should  not 
be  too  long.  There  is  no  use  in  giving  a  man  too  large  a  volume 
of  reading  matter,  because  he  will  not  read  it.  If  it  must  be  long, 
it  is  better  to  hand  it  to  him  in  instalments.  Almost  every  report 
may  be  divided  in  some  way  so  that  it  may  be  completed  in 
sections. 

Every  report  should  state  in  some  form  at  the  beginning  the 
exact  plan  of  action  in  getting  it  up,  not  only  the  specified  pur- 
pose, but  the  actual  machinery  of  the  investigatory  work. 
That  is,  it  should  state  who  was  interviewed,  why  they  were  inter- 
viewed, copies  of  all  questionnaires  with  number  of  answers 
received,  etc.  This  serves  as  evidence  of  the  authority  with 
which  the  investigator  speaks. 

The  writer  should  not  put  himself  forward.  The  report  is 
not  the  place  for  expression  of  his  personality.  Any  opinions 
of  his  own  obviously  should  be  predicated  upon  the  most  authentic 
data. 

The  writer  should  bear  in  mind  that  his  judicial  attitude  must 
always  be  maintained.  Entering  the  lists  on  either  side  will 
make  him  a  partisan,  and  a  partisan  cannot  judge  facts  fairly. 
It  is  true  that  the  results  of  gathered  facts  will  frequently  point 
to  such  obvious  conclusions  that  there  can  be  no  possible  doubt 
as  to  the  result.  For  instance,  where  99%  of  the  replies  are  in 
favor  of  one  result,  the  conclusion  will  be  self-evident.  There 
is  no  partiality  in  the  writer's  strongly  accentuating  the  large 
preponderance  in  the  weight  of  such  evidence. 

Attractiveness.  If  the  man  for  whom  the  report  is  intended 
is  vitally  interested  in  the  subject  matter,  he  will  probably  care 
little  for  the  attractiveness  with  which  it  is  got  up.  But  the  aver- 
age person,  inclined  at  best  to  be  sceptical,  will  not  give  it  due 
attention  unless  it  offers  some  inducement  for  perusal. 

It  is  easy,  to  be  sure,  in  the  attempt  to  render  a  report  readable, 
to  make  it  a  picture  book,  and  thereby  destroy  its  serious  purport. 


PRESENTING  THE  DATA  69 

A  market  report  is  not  for  entertainment.  Irrelevant  matter, 
whether  photographs  or  written  material,  will  prejudice  the  man 
who  pays  the  bills.  Nothing  should  be  introduced  as  mere  pad- 
ding, no  matter  how  attractive  it  may  make  the  report  appear. 
All  material  should  be  analyzed  for  relevance,  both  as  to  inclu- 
sion in  the  report,  and  inclusion  in  any  given  section. 

Where  three  or  four  copies  of  the  report  are  made,  it  is  a  good 
plan  to  have  half  of  them  bound  and  the  others  arranged  in  loose- 
leaf  form,  with  tabs  on  the  edges  of  the  principal  divisions.  The 
bound  copies  will  do  for  circulation  around  the  office,  while  the 
loose-leaf  copies  will  serve  for  future  use,  when  corrected  data 
may  be  inserted  in  place  of  the  old  material.  The  applicable 
life  of  a  report  is  ordinarily  so  short  that  provision  should  be  made 
for  additional  future  reports  on  the  same  subject.  This  loose- 
leaf  form  will  preserve  the  permanent  data  (and  much  data  are 
fairly  permanent,  of  course),  while  it  will  allow  the  insertion  of 
further  material,  whether  new  or  corrected  matter.  A  survey, 
once  started,  is  cumulative.  It  does  not  end  with  the  actual 
writing  of  the  report,  for  material  will  keep  coming  in  long  after- 
wards. Interest  has  been  aroused  which  is  slow  to  subside,  and 
this  should  be  utilized. 

The  paper  on  which  the  report  is  written  should  be  of  good 
quality.  By  using  thin  bond  paper,  a  larger  number  of  carbon 
copies  may  be  obtained. 

An  index  will  not  ordinarily  be  worth  while.  A  table  of 
contents,  however,  is  practically  a  necessity.  In  short  reports 
it  is  quite  possible  to  combine  the  table  of  contents  with  a  very 
brief  summary  of  material,  so  that  anybody  glancing  through 
the  table  of  contents  will  be  able  to  obtain  a  very  good  idea  of 
the  subject  matter  of  the  report.  In  other  words,  the  gist  of 
each  section  is  summarized  in  a  single  sentence. 

The  appearance  of  the  report  will  be  due  in  large  measure  to 
the  mechanical  excellence  of  the  typing.  A  stenographer  should 
be  chosen  capable  of  neat,  accurate,  and  fairly  rapid  performance. 

Wide  margins,  both  at  the  top  and  bottom,  and  also  at  the 
sides,  lend  attractiveness  to  the  report.  No  devices  should  be 
used,  however,  which  will  distract  attention  from  the  text. 

It  is  seldom  considered  good  policy  to  use  single-space  type- 
writing.    It  makes  the  report  hard  to  read,  it  is  difficult  to  cor- 


70  MARKET  ANALYSIS 

rect  without  smudging,  and  experience  has  shown  that  the 
average  individual  has  a  tendency  to  skip  single-spaced  text.  In 
any  event,  it  is  not  the  form  to  use  where  emphasis  is  required. 

There  is  no  harm  in  typing  one  part  of  the  report  in  advance 
of  the  others.  Later,  the  whole  may  be  assembled  and  pages 
numbered  with  an  automatic  numbering  stamp. 

Somewhere  in  the  report,  and  preferably  in  a  convenient  place, 
there  should  be  a  bibliography  of  authorities  consulted,  books 
read  and  referred  to,  etc. 

Form  of  the  Report.  Unless  the  report  is  interesting,  it  will 
be  hard  to  find  readers.  The  style  in  which  it  is  written  has  much 
to  do  with  the  interest.  The  treatment  should  not  be  heavy, 
nor  yet  should  it  be  flippant.  A  report  of  this  kind  is  not  the  place 
for  smartness.  The  investigator  should  take  pains  to  see  that 
the  English  is  correct  both  as  to  grammar  and  spelling,  for  these 
things  are  an  index  of  the  care  which  has  been  taken  in  the 
report. 

It  is  advisable  to  divide  up  the  report  into  comparatively  short 
sections,  classified  under  suitable  headings.  This  makes  it  easy 
for  the  reader  to  understand,  and  also  to  find  any  particular  parts 
in  which  he  is  specially  interested.  It  is  possible,  of  course,  to 
carry  this  process  of  division  so  far  that  the  report  becomes  merely 
a  succession  of  A's  and  B's.  This  has  just  the  opposite  effect 
from  that  intended,  since  too  many  captions  may  destroy  con- 
tinuity, leaving  the  report  with  no  swing  to  carry  it  along. 

The  surveyor  is  sometimes  confronted  with  the  problem  of 
whether  he  shall  write  the  report  precisely  as  the  data  demand 
or  whether  he  must  tone  down  the  subject  matter  to  meet  the 
approval  of  his  readers.  Many  business  men  have  set  ideas,  to 
which  the  market  report  may  run  counter.  While  it  is  desirable 
to  write  without  fear  or  favor,  yet  it  is  important  to  couch  the 
language  in  terms  which  shall  not  be  offensive.  Much  more  will 
be  accompUshed  by  leading  the  reader  than  by  forcing  conclusions 
down  his  throat. 

In  writing  a  report  for  public  consumption,  as  is  done  occa- 
sionally, there  is  more  opportunity  for  color.  In  the  event  of  the 
report's  being  used  by  the  pubUc,  it  is  necessary  to  define  technical 
terms.     The  vocabulary  should  be  simple,  not  ornate. 

Too  much  unimportant  matter  should  not  come  at  the  begin- 


PRESENTING  THE  DATA  71 

ning.  If  general  matter  must  be  included,  it  is  better  to  place  it 
towards  the  end  of  the  report.  Business  men  do  not  care  to  waste 
time  fumbling  through  descriptive  material  when  they  are  look- 
ing for  the  substance  of  the  report. 

All  general  statements  should  be  backed  up  by  facts,  and 
these  facts  should  be  credited  to  the  proper  authorities.  If  a 
dogmatic  statement  appears  in  the  report  without  any  authority 
attached,  it  loses  its  weight.  Who  says  a  thing  is  almost  as 
important  as  what  is  said. 

Illustrating  the  Report.  The  advantage  of  any  pictorial 
method  of  presenting  facts,  over  a  mere  statement,  or  perhaps  a 
tabulation,  is  that  pictures  are  more  readily  grasped  by  the 
mind.  Any  report  which  neglects  the  available  and  simple 
methods  of  pictorial  representation,  either  by  charts,  maps,  or 
photographs,  is  thus  likely  to  be  soon  forgotten.  Fig.  17  shows 
how  the  Electrical  World  has  illustrated  the  growth  in  central 
station  customers.  Mere  figures,  though  impressive,  could  never 
have  conveyed  the  idea  in  such  concrete  fashion  as  is  done  in  the 
illustration. 

It  is  easier  to  comprehend  conclusions  which  are  exemplified  by 
charts.  A  business  man  can  visualize  statements  in  the  report 
almost  instantaneously  by  glancing  at  a  picture.  There  is  no 
necessity  for  making  complicated  charts.  Almost  everything 
which  the  investigator  wishes  to  show  can  be  displayed  in  simple 
form  on  simple  charts.  It  is  wasted  effort  to  make  up  charts  which 
no  one  but  an  expert  could  decipher. 

The  ordinary  person  has  difficulty  in  visualizing  figures.  A 
table  to  many  is  simply  an  aggregation  of  digits.  But  the 
minute  those  digits  are  expressed  in  pictorial  form  the  differences 
become  apparent. 

The  use  of  color  where  economically  possible  gives  better  con- 
trast in  certain  pictorial  work.  High  cost  of  color  printing  may 
prevent  its  use  in  printed  matter,  but,  in  the  ordinary  typewritten 
report,  it  is  possible  to  use  contrasting  wash  colors.  Black  and 
white,  or  cross-hatched  work,  is  not  always  so  effective. 

The  title  to  each  illustration  should  be  so  clearly  understand- 
able and  complete  that  there  should  be  no  need  of  searching 
through  the  text  to  see  what  it  is  all  about. 

In  certain  statistical  work,  absolute  accuracy  is  necessary. 


72 


MARKET  ANALYSIS 


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PRESENTING  THE  DATA  73 

Charts  used  in  the  market  survey,  however,  are  often  based  on 
approximations. 

An  excellent  rule  to  follow  is  to  include  the  numerical  data 
on  the  chart  wherever  possible.  This  allows  the  reader  to  make 
instant  reference  to  the  figures  if  he  wishes  further  information. 
It  is  also  a  good  plan  to  put  in  a  legend  or  foot-note  at  the  bottom 
of  the  chart  to  explain  any  unusual  variations. 

The  Graph.  The  graph  is  one  of  the  best  known  and  simplest 
methods  of  showing  comparisons  over  a  period  of  time,  and  an 
excellent  way  to  show  and  compare  tendencies.  For  instance, 
the  graph  will  show  on  the  same  sheet  of  paper  the  growth  of  the 
company's  business  and  the  growth  of  the  industry.  The  result 
will  be  much  more  impressive  than  the  two  tables  of  figures 
placed  side  by  side.  The  graph  may  be  used  to  show  price  ten- 
dencies and  fluctuations,  and  various  other  things.  In  fact,  the 
surveyor  will  be  able  to  use  the  graph  wherever  there  is  a  suc- 
cession of  figures  stretching  over  a  period  of  time,  provided  that 
the  figures  are  given  for  the  same  thing  in  each  instance. 

The  Bar  Chart.  This  is  the  form  Brinton  proposes  as  the  best 
to  use  for  showing  comparisons  between  figures.  In  his  estima- 
tion it  is  better  than  the  curve  or  any  of  the  other  geometrical 
forms,  the  circle,  the  square,  etc.,  in  that  he  believes  it  is  easier 
to  judge  values  by  it. 

Other  Geometrical  Forms.  The  circle  chart,  divided  into 
sectors,  is  the  most  commonly  used  chart  and  the  most  familiar 
to  the  public.  In  spite  of  Brinton's  disapproval,  it  makes  a  very 
plain  and  striking  appeal  to  the  eye,  especially  if  done  in  colors. 
The  sectors  should  not  be  so  small  as  to  lose  proportion.  It  is  an 
excellent  method  of  showing  component  parts  or  comparisons  of 
costs,  etc. 

The  rectangle  and  other  geometrical  forms  are  often  used. 
The  surveyor  must  suit  himself  in  choosing  the  form  of  illus- 
tration. In  some  cases  figures  such  as  men,  money  bags,  or 
cattle  are  used  to  illustrate  different  sizes,  productive  powers, 
consumptions  or  rank  in  industry,  etc.  Fig.  18  shows  growth  of 
industrial  load  of  electric  power,  })y  graphic  portrayal  of  the  motors, 
meters,  etc.  Such  illustrations  may  be  used  if  the  report  is  to  be 
used  for  sales  purposes  or  where  a  more  scientifically  accurate 
presentation  would  be  over  the  heads  of  the  readers. 


74 


MARKET  ANALYSIS 


PRESENTING  THE  DATA  75 

The  Map.  When  studjang  the  market,  it  is  simple  to  make  use 
of  the  geographical  map  to  show  where  sales  are  best,  where 
competitors  have  a  strong  hold,  the  location  of  dealers  and  jobbers, 
etc.,  etc.  The  different  sections  of  the  countiy  can  be  colored, 
marked  in  black  and  wliite,  or  dots  used  to  denote  frequency. 
One  New  England  bank  has  made  a  map  of  New  England  accord- 
ing to  industries  and  placed  a  certain  distinctive  symbol  wherever 
that  industry  predominated,  a  mill  for  a  mill  center,  a  fish  for  a 
fishing  port,  etc. 

Fig.  51  shows  how  the  map  may  be  utilized  to  represent  pic- 
torially  the  relative  area  of  each  state  as  proportional  to  the 
population. 

The  Organization  Chart.  Wherever  scientific  management 
has  attained  a  hold,  the  organization  chart  is  well  known.  It 
does  not  have  to  be  used  for  showing  the  interrelations  of  the  com- 
pany, but  can  be  used  for  other  purposes  as  well.  For  instance, 
the  distributive  process,  see  Fig.  44,  may  be  shown  in  this  manner 
with  excellent  effect,  indeed  much  more  graphically  than  can  be 
done  with  mere  words. 

Pictures,  Photographs,  etc.  Photographs  add  a  great  deal 
to  the  report,  as  far  as  the  appearance  is  concerned,  but  whether 
the  pictures  add  to  its  value  is  another  matter.  In  some  cases 
they  undoubtedly  do.  In  studying  competition,  it  is  often  feasible 
to  make  up  a  selective  group  of  the  competing  products,  paste 
them  on  a  sheet  of  paper,  and  photograph  or  photostat  them  for 
the  report,  as  a  means  of  illustrating  comparisons,  criticisms,  or 
suggestions. 

If  the  company  is  intending  to  put  in  new  equipment,  or  if 
the  report  tends  to  show  that  new  machinery  is  necessary,  full 
description,  accompanied  by  photographs,  should  be  submitted 
with  any  such  recommendation. 

Tables.  Wherever  there  is  a  chart,  there  should  also  be  a  table. 
Charts  should  not  be  presented  without  the  table,  and  further- 
more, the  table  should  be  as  close  to  the  chart  as  possible,  if  not 
actually  on  it. 

Tables  arc  sometimes  hard  to  grasp,  especially  if  the  amounts 
are  very  high.  If  they  run  up  into  six  figures,  it  may  be  wise  to 
omit  the  last  three  altogether,  or  to  make  them  ciphers  for  case 
in  presentation  and  understanding. 


MARKET  ANALYSIS 


Each  tabic  should  be  a  unit;  there  should  be  no  extraneous 
figures  in  the  column.  It  may  be  advisable  to  accompany  the 
actual  figures  with  percentage  of  increase  or  decrease.  It  is  better 
to  have  two  tables  than  one  rendered  too  complicated  by  multi- 
plicity of  detail. 

Methods  of  Reproduction.  If  more  than  one  copy  of  an  illus- 
tration is  to  be  made,  and  this  is  usually  the  case,  plans  for  draw- 
ing it  should  be  laid  in  advance.  If  the  graph  is  drawn  on  ordinaiy 
white  paper,  a  transparentizing  solution  may  be  obtained  which 
will  permit  of  blue  prints  being  made  from  it.  Or  the  graph 
may  be  drawn  on  tracing  paper  or  cloth  in  the  beginning. 


c 

TO 


Fig. 


?      3     4        'I  2  2. 

19. — Distortion  Caused  by  Lack  of  Standardization  in  Chart  Forms. 
(Ernst  &  Ernst.) 


All  charts  should,  if  possible,  conform  to  the  regular  size  of  the 
report  paper.  Odd-sized  charts  are  of  no  particular  advantage 
and  are  awkward  to  handle  in  the  report. 

Illustrations  should  not  be  bunched  in  one  place  but  should 
be  placed  as  near  as  possible  to  the  points  they  are  supposed  to 
illustrate. 

There  is  little  question  but  that  it  is  better  to  use  pictorial 
methods,  because  they  are  much  more  easily  grasped  and  retained 
in  the  mind.  On  the  other  hand,  they  are  more  expensive,  and  take 
time  and  trouble.  The  man  who  is  getting  up  the  report  for  his 
own  purposes  will  not  need  to  go  to  the  same  labor  for  illustrating 
that  the  advertising  agency  might. 


PRESENTING  THE  DATA  .  77 

Care  should  be  taken  that  charts  showing  similar  tendencies 
and  curves  should  be  drawn  on  the  same  scale.  Fig.  19  illustrates 
distortion  caused  by  charting  the  same  figures  to  four  different 
scales. 

The  Conclusions.  It  is  safe  to  say  that  every  report,  no  matter 
how  short,  should  have  a  resume  of  the  entire  content,  so  that 
the  average  reader  may  get  an  idea  of  the  whole  proposition  in 
half  an  hour.  This  resume  will  be  largely  a  summary  of  conclu- 
sions reached.  In  a  way,  it  is  a  test  of  the  success  of  the  report. 
In  these  few  pages  will  be  crowded  the  results  of  days,  weeks,  and 
perhaps  months  of  effort.  These  conclusions  should  be  brief, 
compact,  and  strictly  to  the  point.  It  is  well  to  place  each 
thought  in  a  separate  paragraph.  Each  conclusion,  if  possible, 
should  prepare  the  way  for  the  one  following. 

It  is  upon  these  conclusions  that  the  company  will  supposedly 
act.  The  conclusions  must  be  an  exact  mirror  of  the  facts.  This 
is  their  first  requisite. 

The  Policy  of  the  Conclusions.  It  has  proved  beneficial  in 
some  cases  to  let  someone  unfamiliar  with  the  report  read  it  and 
write  the  conclusions  as  he  sees  them  from  his  perusal.  It  is 
always  interesting  to  have  this  done,  and  can  do  no  harm,  and  there 
is  much  opportunity  for  benefit,  since  the  survej^or  may  find  him- 
self with  some  new  ideas  as  a  result.  The  majorty  of  minds  seem 
to  be  critical  rather  than  constructive,  and  although  they  may  not 
be  able  to  give  a  clear  exposition  of  any  subject  themselves,  if 
something  is  submitted  to  them,  they  will  immediately  be  able 
to  pick  out  the  flaws. 

The  following  conclusions  were  drawn  from  a  study  of  the 
cotton  toweling  industry,  and  although  brief,  contain  the  gist 
of  a  long  report: 

There  are  three  classes  of  toweling  purchasers:  institutions,  certain  pro- 
fessions, and  housewives. 

The  housewives  of  the  United  States  n^present  an  annual  total  buying 
potential  of  146,400,000  yards.  This  coml)ines  markets  for  linen,  Turkish, 
"union,"  and  cotton  towelings. 

Linen  leads,  chiefly  by  virtue  of  tradition,  prestige,  and  durability; 
Turkish  is  second,  and  cotton  a  poor  third. 

The  market  potential  for  cotton  toweling  is  approximately  27%  of  the 
total,  or  39,5.38,000  yards. 

There  is  a  pref(!rence  for  buying  all  toweling  made-up  rather  than  by 
the  piece,  although  current  reaction  may  alt(T  the  ratio  somewhat. 


78  MARKET  ANALYSIS 

Toweling  is  a  staple  commodity  and  only  slightly  seasonal  as  regards 
the  consumer. 

Fig.  20  shows  the  conclusions  of  the  field  survey  conducted 
by  the  jMinncapolis  Tribune. 

It  may  seem  rather  a  backhanded  manner  of  progression  to 
put  the  conclusions  immediately  after  the  table  of  contents,  but 
this  appears  to  be  the  preferred  location.  It  is  what  the  lousiness 
man  or  the  casual  reader  will  wish  to  examine  first,  because  these 
conclusions  arc  brief  and  pithy,  and  contain  the  gist  of  the  report. 

General  Conclusions.  There  is  a  difference  between  con- 
clusions and  recommendations.  The  first  are  findings  based  on 
facts,  the  second  are  the  author's  interpretation  of  those  facts 
as  related  to  the  company.  To  follow  out  a  conclusion  may  be 
either  impossible  or  inexpedient  as  far  as  the  company  is  con- 
cerned. For  this  reason,  it  is  sometimes  advisable  for  the  sur- 
veyor to  append  recommendations  in  which  he  embodies  either 
his  own  interpretation  or  that  of  some  authority.  For  instance, 
a  conclusion  may  simply  lead  to  the  point  that  new  equipment 
is  needed,  and  needed  badty,  since  it  is  the  logical  time  to  increase 
production,  and  take  advantage  of  market  opportunities.  A 
recommendation  would  take  cognizance  of  the  fact  that  the 
company  was  not  in  a  financial  position  to  go  ahead  w^th  addi- 
tional expenditures,  and  might  recommend  a  compromise,  such 
as  renting  additional  productive  capacity,  etc. 

A  conclusion  should  not  be  capable  of  alteration  except  insofar 
as  the  facts  upon  which  that  conclusion  is  based  should  change. 
A  recommendation  is  a  personal  solution  of  a  problem  presented 
in  a  conclusion. 

It  will  now  be  interesting  to  compare  the  final  conclusions  with 
those  reached  in  the  preliminarj'  report,  and  to  see  how  closely 
the  two  coincide.  The  prehminar}^  findings  may,  in  fact,  suggest 
something  that  had  been  omitted  in  the  final  conclusions,  and  which 
should  have  been  included. 

No  matter  how  far  our  investigation  may  be  carried,  there  will 
still  be  a  great  many  points  not  disposed  of.  The  deeper  the 
investigation  goes,  the  more  avenues  of  research  will  be  opened. 
Accordingly,  there  will  always  be  many  matters  that  still  remain 
unsolved.  Apropos  of  them,  it  is  a  good  plan  to  set  them  forth 
in  direct  question  form,  making  a  sort  of  interrogatory  series  of 


PRESENTING  THE  DATA  79 


Washing  Machine  Survey 

Covering  the   Minneapolis   Market 

Prepared  bv  the   Minneapolis   "  Tribune  " 

Service  Department 


The  population  of  Minneapolis  is  380,582. 

There  are  88,000  homes  in  Minneapolis,  and  95,000  families.  The 
number  of  English-reading  homes  is  70,000. 

The  average  annual  earnings  of  each  family  is  $2,500.  The  total 
annual  savings  deposits  of  Minneapolis  is  $70,000,000  and  the  total 
number  of  depositors  245,000. 

There  are  60,000  homes  wired  for  electricity. 

The  number  of  washing  machines  now  owned  in  Minneapolis  is 
12,000,  apportioned  as  follows: 

Number  of  electrical  machines 7000 

Number  of  hand-power  machines 4000 

Number  of  water-power  machines 1000 

The  leading  makes  of  washing  machines  on  the  MinneapoUs  market 
are: 

Daylight  Western  Electric 

Gainaday  1900  Washer 

Thor  Eden 

A.  B.  C.  Washer  Easy 

Judd  Mola 

Liberty  Locomotive 

The  principal  advertised  makes  are  Daylight,  Gainaday,  Thor,  and 
Judd. 

Prospects:  There  are  149,800  persons  patronizing  each  week  105 
laundries  of  Minneapolis.  Of  these  50  are  commercial  laundries  doing 
an  average  of  about  $4,000  a  week  in  business  with  about  2,000  cus- 
tomers each.  The  balance  are  Chinese  laundries  and  wet-wash 
laundries. 

There  are  57  dealers  in  electrical  appliances. 

There  are  97  retail  hardware  dealers  who  are  prospects  as  washing 
machine  dealers. 


Fig.  20. — Tabulation  of  Conclusions  of  P'ield  Survey. 


80  MARKET  ANALYSIS 

suggestions.  This  is  valuable,  partly  at  least  because  It  stimulates 
the  reader,  and  partly  because,  after  all,  one  of  the  greatest  bene- 
fits of  a  report  is  not  the  direct  information  which  it  provides, 
but  the  indirect  value  of  the  suggestions  and  ideas  which  it 
excites. 


CHAPTER  V 

ORGANIZING  THE   MARKET   SURVEY 

Outline 

Is  the  company  in  a  position  to  carry  on  this  worlc  itself? 

A.  What  would  be  the  advantages? 

1.  Would  it  make  the  work  continuous? 

2.  Would  it  cost  less? 

3.  Could  the  work  be  combnied  with  that  of  other  departments? 

4.  Do  the  company's  files  contain  much  valuable  information? 

B.  Wliat  would  be  the  disadvantages? 

1.  Is  the  company  too  small  to  alTord  a  survey  department? 

2.  Is  there  marked  hostility  towards  the  idea  of  such  a  department 

among  other  departments? 

3.  Is  the  company  so  situated  that  the  work  could  be  done  more 

advantageously  by  an  outside  agency? 

C.  What  would  such  a  department  cost? 

1.  What  is  the  scope  of  the  work? 

2.  How  much  interviewing  must  be  done? 

3.  How  many  oflBce  appliances  are  available? 

D.  What  are  the  quahfications  of  the  research  director? 

1.  Does  he  understand  practical  business  problems? 

2.  Has  he  a  grounding  in  economics? 

3.  Has  he  imagination  and  interpretive  ability? 

4.  Is  his  mind  analytical? 

5.  Has  he  any  knowledge  of  statistics? 

6.  Can  he  present  these  statistics  pictorially? 

7.  Has  he  the  aliility  to  meet  people? 

8.  Does  he  possess  tact? 

9.  Is  he  a  good  letter  writer? 
10.  Has  he  the  scientific  spirit? 

E.  How  many  assistants  would  be  required? 

1.  Clerical  assistance. 

2.  Interviewers. 

(a)  Can  any  of  the  office  force  bo  drafted  for  service  at  need? 

(b)  Is  it  possible  to  use  women  for  interviewers? 

(c)  Can  the  sales  force  be  utilized  to  gather  information? 

81 


82  MARKET  ANALYSIS 

V.  Wliat  should  the  relation  be  between  research  and  other  departments? 
1.  Is  the  research  department  likely  to  coordinate  the  other  depart- 
ments? 

G.  What  office  equipment  is  desirable? 

1.  An  adequate  filing  system. 

2.  Multigraph,    mimeograph,    automatic   typewriter,  or   some   other 

means  of  getting  out  questionnaires  and  form  letters. 

3.  Adding  machines,  slide  rule,  etc. 

4.  Machine  to  stamp  envelopes,  etc.,  etc. 

5.  Reference  books,  mailing  Usts,  etc. 

H.  Under  whose  name  shall  the  work  be  done? 

1 .  Is  it  wise  to  use  the  name  of  the  company? 

(a)  Would  it  prejudice  results? 

(b)  Should  company's  address  be  used? 

2.  Necessary  to  use  company's  name  in  field  work? 

I.    Where  ought  department  to  be  located,  at  sales  offices  or  at  plant? 
J.    How  long  does  it  take  to  make  a  survey? 

What  other  organizations  are  quaUfied  to  carry  on  market  surveys? 

A.  The  advertising  agency. 

1.  The  advantages,  what  are  they? 

(a)  A  protection  to  itself  and  its  client. 

(6)  A  necessary  preliminary  to  accurate,  scientific  advertising. 

(c)  A  form  of  service  used  as  a  business  getter. 

2.  What  are  the  disadvantages? 

(a)  The  danger  of  the  biased  viewpoint  in  prophesying  the  neces- 
sity for  pubUcity  through  advertising. 

B.  Newspapers  and  periodicals. 

1.  With  local  circulation. 

(a)  A  form  of  service,  chiefly  through  field  surveys  and  the  deter- 
mination of  local  sales  resistance  and  potentialities. 

2.  With  national  circulation. 

(o)  Information  concerning  industry  in  general. 

(1)  Studies  of  purchasing  power. 

(2)  Per  capita  consumption. 

(3)  Class  markets. 

C.  The  industrial  engineer. 

1 .  How  is  he  qualified  to  undertake  the  work? 
(a)  By  training. 

(6)  Background  of  scientific  principles. 
(c)  Understands  organization. 


ORGANIZING    THE    MARKET   SURVEY  83 

D.    The  independent  specialist. 

1.  His  advantages,  what  are  they? 

(a)  Understands  general  market  conditions. 
(5)  The  prejudiced  viewpoint  is  eUminated. 

(c)  Can  make  surveys  on  quantity-production  basis,  and  therefore 

in  many  cases  cheaper. 

(d)  Has  had  benefit  of  experience  investigating  other  fields. 


CHAPTER  V 
ORGANIZING   THE   MARKET   SURVEY 

Individual  requirements  and  conditions  will  affect  the  question 
of  who  shall  carry  on  market  analysis.  For  some  time,  it  is  to 
be  expected  that  the  work  will  be  done  by  the  various  types  of 
organizations  existing  at  present,  such  as  (1)  the  company  itself, 
(2)  the  advertising  agency,  (3)  newspapers  and  periodicals,  (4) 
the  industrial  engineering  concern,  and  (5)  the  independent 
individual  or  organization. 

We  speak  of  a  market  survey  and  ordinarily  think  of  it  as 
something  peculiar  to  markets.  But,  as  has  been  pointed  out, 
the  marketing  problem  is  at  the  root  of  every  business  problem. 
It  lies  beneath  the  purchasing  and  the  production,  it  is  the  aim 
and  direct  goal  of  the  sales  department.  Therefore  a  research 
department  for  the  study  of  markets  becomes  in  actual  practice 
a  laboratory  for  the  study  of  all  the  company's  non-technical 
problems,  since  all  of  them  are  so  closely  correlated  with  the  study 
of  the  market. 

The  Application  of  Scientific  Methods  to  Markets.  It  seems 
indisputable  that  the  markets  of  the  future  are  to  be  won  only 
through  the  application  of  scientific  methods.  The  probability 
is  that  markets  will  from  now  on  be  sought  so  competitive^  that 
we  can  rarely  expect  to  find  them  ready  made.  They  will  be 
available  ordinarily  only  to  those  who  apply  most  intensively 
the  scientific  methods  of  modern  industry-. 

Science  is  built  upon  facts.  Therefore  the  first  step  in  the 
application  of  science  to  markets  is  that  of  revealing  all  facts 
which  bear  upon  the  problem.  First  of  all,  the  market  survey 
department  must  obtain  these  facts;  secondly,  it  must  analyze 
and  interpret  them;  and  thirdly,  it  must  show  how  these  findings 
may  be  apphed  to  the  particular  business  in  question. 

It  has  been  said  in  regard  to  commercial  research  that  "  the  man 
is  more  important  than  the  method."     To  a  great  extent  this  is 

84 


ORGANIZING    THE    MARKET   SURVEY  85 

true.  It  is  largely  in  the  hands  of  the  man  who  does  the  actual 
research  work  to  make  or  mar  the  survey.  Although  the  funda- 
mental principles  underlying  every  market  investigation  are  the 
same,  the  individual  problem  demands  individual  treatment. 
To  the  man  with  scientific  training  who  has  a  thorough  grasp  of 
business  principles  the  application  of  the  market  survey  is  least 
difficult. 

The  Company's  Market  Research  Department.  In  many 
ways  the  company  is  in  the  best  position  to  prosecute  a  study 
of  its  market.  In  the  first  place,  its  own  files  should  contain  infor- 
mation which  will  prove  invaluable  in  the  research  work.  Further- 
more, the  company  may  be  in  a  position  to  carry  on  this  work  at 
a  somewhat  lower  charge,  although  this  is  by  no  means  certain, 
since  to  a  large  extent  the  expense  of  market  surveys  is  dependent 
upon  conducting  the  work  on  a  quantity  basis.  Accordingly, 
unless  the  company  has  a  very  considerable  marketing  problem, 
it  can  hardly  afford  to  maintain  a  force  solely  for  this  purpose. 

Fig.  21  shows  the  organization  of  a  successful  research 
department.  Every  step  in  the  process  is  clearly  delineated. 
There  is  no  opportunity  for  overlapping  of  functions,  or  lost 
energy.     The  methods  and  the  sequence  are  carefully  planned. 

Perhaps  the  greatest  advantage  of  the  company's  having  its 
own  market  analysis  department  is  that  the  work  then  becomes 
a  continuous  process,  or  at  least  a  process  which  is  carried  forward 
at  periodic  intervals,  so  that  altered  conditions  in  the  market 
and  in  the  industry  at  large  are  always  kept  in  view.  The  neces- 
sity for  regarding  markets  as  constantly  changing  and  not  as 
fixed  phenomena  should  not  be  lost  sight  of. 

Companies  whose  size  does  not  warrant  keeping  up  an 
expensive  organization  purely  for  the  study  of  markets  may  find 
it  possible  to  combine  market  survey  work  with  other  regular 
work  of  the  company.  The  functions  of  an  industrial  engineering, 
a  planning,  a  betterment,  or  an  efficiency  department,  though 
unlike  in  one  way,  yet  are  properly  carried  on  by  similar  scien- 
tific methods,  and  it  is  possible  that  the  work  of  market  analysis 
may  be  combined  with  them. 

If  the  company  already  has  a  research  or  statistical  depart- 
ment, the  place  to  do  the  market  analysis  work  is  logically  pro- 
vided for.     If  no  other  place  is  available,  the  work  might  be 


86 


MARKET  ANALYSIS 


conducted  under  the  auspices  of  the  sales  or  advertising  depart- 
ment, yet  a  word  of  caution  is  necessary  against  doing  this  unless 
it  is  certain  that  the  freedom  of  action  of  the  director  of  research 
be  not  interfered  with.  There  is  too  likely  to  be  a  feeling  of 
hostility  from  the  sales  department  unless  it  is  realized  that  the 
research  work  is  intended,  not  as  a  check-up  on  the  sales  manager, 


MANAGEMENT 


r- AUTHORISATION 
FOR  WORK 


C  0  NTACT 


Contracta  Rate  Siccountii 
Dep'f  Dep't 


Personnd 


Librar\j 


Records 

and 
Billing 


Corres- 
pondence 


Miscelld-RSquisihon 


Record 
of  Work 


Sales 
Dep'f 


Copy 


i"gClien+ 


Oufeide 


n-GENERAL  ANALYSIS  OF  WORK 
"What  do  we  need  io  know  1 ' 


m-WORKlNG  PLAN 
'WhaVdo+a  shall  weget?  Where?" 
Methods  of  Procedure 


General 


ry-SECURING    DATA 


From  Client- 


Figures 
.onSales, 
S«llinqQ)3ts; 
Profits 

Districts; 
Uierperiotf 
ofuears;foP 
cljmand 
cliwtsesti- 


Selling    Miscella- 

and    I    neous 
Advertising      as 
Methods  needed 
3fClienh 
and  of 
r- Jompetthit! 


From   Field 


Distribution  lUinsumer 

Jobber,retailer{andconiLinierjaccept-jQuesh'oi> 
ance  ofcjientsandcompetifors'     nairesto 
linesorservice-andotherdata-       Lists 
by 


Scout 
Work 


Field 
Work 


Correspondent 
Investigators 
QuestiOTingires 


City 


Agricul- 
tural 


From  PrintecJ 
Material 


General 
e.g. 
Populalion 
Income 
Auto- 
Registra- 
tion 
Distribu 
hon  Cen- 
ters 
Medium^ 


FtartKulor 

for 
Clients 


ff-ASSEMBLING  DATA 


W-INTERPRETING  DATA 


Vir- PRESENTATION 
(Textand  Charts) 


¥ni-DELIVERY  TO  CLIENT 


Fig.  21. — Organization  Chart  of  Commercial  Research  Department. 


but  as  helping  to  put  his  work  on  a  more  logical  and  sound,  and, 
therefore,  more  profitable  basis.  The  same  applies  to  the  adver- 
tising department,  which  is  usually  the  first  to  profit  by  the  results 
of  the  survey. 

Cost.     The   company's    best  plan    in   regard   to   cost  is   to 
set  aside  the  amount  of  money  it  is  willing  to  spend  for  market 


ORGANIZING    THE   MARKET   SURVEY  87 

research  work.  No  accurate  estimate  could  be  given  in  advance 
of  what  an  investigation  would  cost,  since  it  depends  on  the  scope 
and  thoroughness  with  which  the  work  is  done,  on  the  care 
taken  in  detail  work,  such  as  interviews,  questionnaires,  etc. 
Where  interviewing  is  done  on  any  large  scale,  travelling  expenses 
will  amount  to  a  considerable  sum.  For  this  reason  it  may  be 
advisable  to  do  interviewing  near  at  hand,  and  to  cover  the 
distant  territory  by  means  of  questionnaires  and  letters. 

If  a  company  installs  a  market  research  department,  it  should 
not  be  too  large  at  the  start.  Not  many  businesses  would  warrant 
a  full-fledged  department  at  the  beginning.  Cost  is  materially 
decreased  also  by  various  office  mechanical  appliances  which  do 
away  with  much  clerical  help. 

The  Qualifications  for  Research  Work.  It  goes  without  say- 
ing that  the  value  of  the  work  will  be  directly  dependent  on  the 
character  of  the  man  in  charge.  In  selecting  him,  the  company 
will  have  two  alternatives,  first,  to  organize  a  department  with 
a  research  director  secured  from  an  outside  source,  or  secondly, 
to  choose  someone  from  its  own  staff,  who  is  specially  qualified 
for  the  work,  as  the  nucleus  of  the  department. 

The  director  of  the  research  work  must  combine  two  distinct 
capacities,  not  ordinarily  found  together.  In  the  first  place, 
he  must  have  a  sound  understanding  of  practical  business  prob- 
lems, plus  a  grounding  in  economics.  That  is,  he  must  not  be 
a  mere  theorist,  although  understanding  thoroughly  the  theory. 
In  the  second  place,  he  must  have  imagination  and  interpretive 
ability. 

In  addition  to  these  fundamental  requisites,  there  are  other 
qualities  which  the  research  director  must  possess  himself  or  be 
able  to  command.  His  mind  should  have  an  analytical  turn. 
He  should  be  able  to  pick  problems  to  pieces,  to  dissect  them  into 
their  component  parts,  and  conversely  he  should  be  able  to  take 
isolated  facts  and  build  them  together  again. 

He  should  be  able  to  classify  facts.  He  should  have  a  knowl- 
edge of  statistics.  Although  he  need  not  necessarily  be  a  statis- 
tician, he  should  be  able  to  utilize  the  statistics  which  have  been 
gathered,  as  well  as  know  what  statistics  should  be  collected. 

He  must  be  able  to  present  a  column  of  figures  or  an  array  of 
similar  facts  pictorially.     If  he  himself  is  not  a  draftsman,  there 


88  MARKET  ANALYSIS 

should  bo  somebody  available  with  enough  ability  in  mechanical 
drawing  to  construct  graphs,  charts,  etc.,  under  his  supervision. 

The  director  shoukl  have  presence.  He  must  meet  with  and 
consult  many  people,  from  the  technical  expert  to  the  heads  of 
large  business  ventures.  He  should  have  tact.  He  is  continu- 
ally faced  with  situations  where  he  must  instinctively  know  the 
right  thing  to  do. 

The  investigator  should  know  how  to  write  letters.  His 
correspondence  will  be  large,  varied,  and  insistent.  Of  course, 
the  more  he  can  standardize  his  correspondence,  the  less  time 
will  have  to  be  devoted  to  this  task. 

Assistants.  Market  analysis  cannot  be  handled  to  the  best 
advantage  by  one  man.  In  the  first  place,  no  man  is  likely  to  be 
found  who  will  contain  in  himself  alone  the  desirable  qualifica- 
tions of  a  market  research  specialist.  Therefore,  he  should  have 
assistants.  Their  number  and  quaUty  will  be  determined  by  the 
nature  and  scope  of  his  work.  In  addition  to  a  stenographer, 
and  possibly  a  filing  clerk,  he  should  be  able  to  command  the 
services  of  interviewers,  although  interviewing  is  so  important 
that  he  himself  should  do  a  portion  of  it. 

One  solution  of  the  problem  of  getting  assistants  has  been  found 
in  drafting  some  of  the  regular  office  force  for  temporary  help. 
Since  under  any  conditions  the  work  is  sporadic,  and  since  the  need 
for  assistants  fluctuates,  this  may  prove  sufficient. 

The  difficulty  with  using  salesman  as  assistants  is  that  they 
are  salesmen,  and  are  "  sold  "  themselves  on  the  product  and  the 
company.  A  salesman  with  doubts  in  his  mind  proves  a  poor 
investment  as  a  salesman,  although  not  necessarily  as  an 
investigator. 

Clerical  help  is  of  great  importance.  Filing  should  be  done 
every  day  as  a  matter  of  office  practice.  In  the  case  of  field  sur- 
vey work,  investigators,  or  scouts,  will  be  required.  Obviously 
the  director  of  the  work  cannot  himself  do  all  of  this  investigating, 
if  carried  on  on  a  large  scale.  He  must  rely  on  subordinates. 
Women  may  be  used  for  interviewing  in  many  cases.  In  addition 
to  being  cheaper,  women  often  prove  more  conscientious  and 
painstaking.  Frequently,  also,  they  obtain  a  more  courteous 
hearing. 

One  form  of  interviewing  which  has  been  productive  of  good 


ORGANIZING    THE    MARKET   SURVEY  89 

results  is  to  put  an  interviewer  behind  the  counter  of  the  retail 
store  where  goods  are  finally  sold  and  by  judicious  questioning  of 
customers  obtain  an  interesting  view  of  the  problem. 

Coordinating  the  Research  Department  with  Sales,  Production, 
etc.  What  should  the  relation  be  between  the  research  depart- 
ment and  the  sales  department?  What  can  it  get  from,  and  what 
can  it  contribute  to  the  other  departments?  The  research  depart- 
ment ought  not  only  to  aim  at  cooperating  with  other  depart- 
ments of  the  company,  but  it  ought  further  to  be  a  coordinating 
influence  in  itself.  Its  veiy  work  is  of  such  a  character  as  to 
join  together  the  various  segments  of  which  the  company  is 
composed. 

For  example,  if  the  product  which  is  being  manufactured 
does  not  exactly  meet  the  demands  of  the  market,  this  will  proba- 
bly result  eventually  in  readjusting  the  relations  between  the  sales 
and  production  departments.  The  research  director  should  be 
the  first  to  become  cognizant  of  this  necessity  for  adjustment,  and 
ought  to  bring  the  matter  to  the  attention  of  the  two  departments, 
and  be  the  medium  through  which  things  are  straightened  out. 

Although  the  research  department  will  act  as  a  species  of 
advance  agent  of  the  sales  department,  blazing  new  trails  for  it 
to  follow,  and  assisting  in  the  outlining  of  new  campaigns,  it 
stands  from  an  organization  viewpoint  between  production  and 
sales,  as  a  coordinating  function  between  the  two. 

Oflace  Equipment.  The  market  research  department  needs 
adequate  filing  systems  and  methods  for  producing  letters  in  quan- 
tity. A  multigraph  will  do  the  work  effectively  and  can  be  made 
to  perform  a  very  neat  job,  under  proper  operation.  As  there  is 
no  particular  advantage  in  research  work  in  disguising  a  form 
letter,  emphasis  may  be  placed  on  speed  and  efficiency  in  turning 
out  letters.  A  mimeograph  will  do  for  making  questionnaires, 
but  is  hardly  perfect  enough  to  serve  for  letters.  The  auto- 
matic typewriter,  if  the  company  already  possesses  one,  is  good 
for  some  purposes. 

There  are  various  mechanical  contrivances  which  make  the 
routine  of  the  department  nmch  simpler.  An  adding  machine 
is  a  convenience.  A  slide  rule  is  of  much  help  in  analyzing 
figures. 

A    machine    which    stamps    envelopes,     [)i'incipally     return 


90  MARKET  ANALYSIS 

envelopes,  since  government  stamped  envelopes  are  more  practi- 
cable for  the  department's  mailing,  is  of  assistance  where  the 
campaign  is  widespread.  A  sealing  machine  is  also  handy.  It 
is  not  worth  wliile,  of  course,  to  purchase  things  especially  for 
this  department.  There  may  be  a  mail-order  or  maihng  depart- 
ment already  existing  which  can  handle  much  of  the  work  for  the 
investigator. 

The  company  should  own  the  reference  books  pertaining  to 
its  own  line  of  business,  as  well  as  subscribe  to  the  trade  periodicals. 

In  time,  the  department  will  accumulate  much  valuable 
equipment,  such  as  files  of  catalogues,  maihng  lists,  etc.  A 
skilful  composer  of  letters  can  get  together  a  collection  of  form 
letters  which  will  answer  for  a  large  amount  of  the  correspondence. 
By  collecting  these  in  a  form  book,  numbered  and  indexed,  it  is 
simply  necessary  to  set  down  the  number  of  the  reply  on  the  face 
of  the  letter  of  routine  business  nature,  and  the  stenographer 
will  then  have  simply  to  copy  from  the  stereotyped  form. 

Under  Whose  Name  Shall  the  Work  be  Done?  In  many  cases, 
to  conduct  the  investigation  under  the  name  of  the  company  has 
disadvantages.  For  instance,  in  obtaining  information  by 
questionnaire,  the  results  are  often  better  if  letters  are  sent  out 
under  the  investigator's  own  name.  This  is  chiefly  for  the  reason 
that  once  the  name  of  the  company  is  known  it  has  a  tendency 
to  bring  forth  biased  answers. 

It  may  also  be  desirable  to  use  a  private  address,  since  the 
company's  address  might  betray,  its  identity.  In  writing  to 
experts,  it  is  better  to  use  personal  stationery  because  of  their 
possible  affiliations  with  competing  companies.  Particularly, 
in  writing  abroad,  it  is  desirable  to  use  the  investigator's  own 
name,  since  in  foreign  countries  there  is  much  more  hesitancy 
about  giving  out  information  than  in  this  country. 

In  personal  interviews,  it  is  hard  to  avoid  using  the  com- 
pany's name,  and  it  is  then  part  of  the  interviewer's  task  to  remove 
any  disagreeable  impression  or  preconceived  opinion.  In  a 
consumer  investigation,  where  the  exact  impressions  of  dealers 
and  jobbers  are  desired  about  the  company,  its  product,  and  its 
marketing  poHcies,  the  use  of  the  company's  name  is  obligatory, 
but  the  way  in  which  it  is  brought  in  may  have  much  to  do  with 
the  success  of  the  investigation. 


ORGANIZING    THE    MARKET   SURVEY  91 

Although  the  research  department  ought  to  be  closely  in  touch 
with  the  plant  and  production  activities,  yet  probably  it  should 
be  located  at  the  offices,  in  cases  where  the  two  are  separated. 

How  long  it  takes  to  make  a  survey  depends  on  the  character 
of  the  investigation.  The  prehminary  survey  takes  but  a  short 
time.  Field  surveys  alone  may  also  be  completed  in  a  fortnight 
or  less.  Where  letters  have  to  be  written,  questionnaires  com- 
posed, mailing  lists  formulated,  and  other  details  arranged,  it  will 
take  a  much  longer  time.  Where  the  survey  is  international, 
the  length  of  time  required  to  receive  information  from  foreign 
sources  makes  the  duration  of  the  survey  much  longer. 

The  Advertising  Agency.  Much  of  the  most  advanced  work 
yet  done  in  market  analysis  has  been  accomplished  by  advertising 
agencies. 

This  has  been  due  to  a  number  of  factors.  First  of  all,  it  was 
the  advertising  agency  which  was  in  the  best  position  to  make 
immediate  use  of  any  thorough  analysis  of  a  market.  In  fact, 
without  positive  data  as  to  markets,  their  extent,  requirements, 
peculiarities,  and  general  characteristics,  it  is  now-a-days  next  to 
impossible  to  formulate  a  rational  advertising  program.  The 
advertising  agency,  therefore,  if  it  is  to  compete  with  other  agencies, 
is  practically  forced  to  provide  itself,  either  within  its  own  organi- 
zation or  elsewhere,  with  the  means  for  conducting  work  of  this 
nature.  Whether  or  not,  as  the  analysis  of  markets  is  better 
understood,  this  sort  of  work  will  need  to  be  done  by  the  agencies 
is  problematical.  In  some  instances,  it  has  been  found  that 
research  work  was  overdone  by  agencies  and  that  it  did  not  lead 
to  the  most  desirable  results.  There  was  a  tendency  to  use  the 
service  as  a  "  business-getter."  This  is  the  natural  and  legiti- 
mate use  of  any  service,  but  it  is  likely  in  this  instance  to  prove  an 
unsound  policy,  since  it  presupposes  that  one  finding  of  the  investi- 
gation will  be  the  recommendation  of  an  advertising  appro- 
priation. It  is,  of  course,  unscientific  to  presuppose  anything 
so  definite  as  to  the  outcome  of  any  investigation. 

The  advertising  agency  is  in  one  way  advantageously  placed, 
since  its  clients  presumably  look  to  it  for  advice  in  merchandising 
problems  connected  with  publicity,  and  in  many  cases  follow  that 
advice.  In  a  way,  the  possession  of  a  research  department  is  as 
important  for  the  agency  as  for  the  client,  since  the  reputation 


92  MARKET  ANALYSIS 

of  the  agency  depends  on  the  successful  carrying  out  of  its  advertis- 
ing campaigns,  and  that  success,  in  turn,  is  dependent  upon  a 
thorough  knowledge  of  the  product  and  the  market. 

Researches  carried  on  by  advertising  agencies  are  usually 
less  thorough  than  those  made  by  a  company  which  maintains  a 
department  of  its  own.  The  research  department  of  the  agency  will 
be  dealing  in  all  kinds  of  problems,  whereas  the  company  v/ill 
devote  itself  to  a  single  subject.  Accordingly,  in  choosing  a  man 
for  company  research,  his  acquaintance  with  the  particular  busi- 
ness might  be  a  matter  of  importance,  whereas  in  choosing  a  man  to 
do  research  work  for  an  advertising  agency,  it  would  be  well  to 
get  someone  capable  of  handling  problems  covering  a  wide  range 
of  subjects. 

Newspapers  and  Periodicals.  Many  newspapers  in  the  larger 
cities  offer  a  so-called  merchandising  service,  free  to  advertisers. 
The  surveys  which  they  make  are  confined  to  a  narrow  radius  of 
activity,  namely  the  field  survey.  In  that  sphere  they  have  been 
very  successful. 

To  the  advertiser,  this  service  is  often  a  boon.  It  indicates  for 
him  the  place  of  his  product  in  the  local  field,  and  sets  forth  the 
sahent  facts  about  its  popularity  or  unpopularity.  The  value 
of  these  surveys  for  the  newspaper  lies  in  the  fact  that  they  can  be 
used  to  interest  the  manufacturer  of  a  similar  product  as  weU  as 
the  manufacturer  for  whom  it  is  made. 

The  newspaper  has,  perhaps,  an  even  better  opportunity 
than  the  agency  to  do  this  work,  since  the  articles  advertised 
in  newspapers  cover  so  wide  a  range.  Again,  the  newspaper  has 
enormous  funds  of  information  to  draw  upon,  and  a  reportorial 
force  which  may  contribute. 

The  idea  of  market  analysis  has  spread  with  such  rapidity  that 
it  is  now  no  unusual  thing  to  find  magazines,  periodicals,  and  trade 
papers  equipped  with  research  departments.  Whereas  the  local 
newspapers  deal  with  local  market  problems,  the  national  mag- 
azines are  more  hkely  to  deal  with  the  industry  in  general.  They 
make  studies  of  purchasing  power,  per  capita  consumption, 
"  quality  markets,"  etc.  Their  aim  is  to  show  where  the  great 
opportunities  He  in  national  advertising,  and  how  their  medium 
serves  the  purpose  best.  This  information,  again,  is  free  to  adver- 
tisers, and  is  often  pubUshed  for  the  information  of  the  public. 


ORGANIZING    THE   MARKET   SURVEY  93 

The  Industrial  Engineer.  The  chief  claim  of  the  industrial 
engineer  to  conducting  market  analysis  work  is  that  he  is  excel- 
lently quahfied  by  training  and  constant  contact  with  similar 
problems  to  cope  with  the  pecuhar  comphcations  and  far-reaching 
ramifications  which  market  survey  work  entails.  The  analysis  of 
markets  is  not  so  different  from  the  analysis  of  production  problems. 
In  fact,  the  same  principles  of  scientific  management  which  apply 
to  one  may  be  expected  to  apply  with  equal  force  to  the  other. 
Many  industrial  engineers  have  found  it  a  logical  extension  of  their 
activities  to  enter  the  field  of  commercial  research.  The  industrial 
engineer  understands  organization,  and  organization  is  very 
important  in  market  analysis. 

The  Independent  Market  Engineer.  The  main  advantages  of 
conducting  work  of  this  sort  through  an  independent  worker  are 
two.  First,  he  is  a  specialist,  devoting  his  entire  time  to  a  single 
subject.  He  is  thus  in  a  position  not  only  to  be  able  to  diagnose  a 
particular  company's  problem  with  fair  accuracy,  even  from  a 
somewhat  superficial  examination,  but  he  is  also,  by  virtue  of  a 
wide  experience  with  markets  in  every  field,  conversant  with  the 
markets  and  marketing  problems  of  the  entire  countiy^  not  to 
speak  of  the  broader  significance  of  international  marketing 
problems. 

Now,  it  is  of  primary  importance  that  any  student  of  markets 
should  understand  fundamental  conditions — social,  political,  and 
economic,  as  well  as  purely  commercial,  since  it  is  the  broad  gen- 
eral questions  of  the  day  which  are  really  the  underlying  factors 
controlling  all  supply  and  demand,  factors  to  which  any  marketing 
problem,  of  whatever  nature,  will  eventually  be  resolvable. 

Aside  from  the  temporal  questions  referred  to,  the  specialist 
is  in  a  position  to  acquaint  himself  more  thoroughly  with  the 
economic  laws  which  control  markets,  such  as  supply  and  demand. 
Simple  as  these  various  laws  appear,  when  each  one  is  considered 
as  operating  individually,  they  are,  when  observed,  in  the  inevi- 
table conflict  and  complication  characteristic  of  all  practical  and 
actual  business  problems,  baflfling  to  the  mind  which  has  not  been 
trained  in  the  technique  of  markets. 

The  second  advantage  of  conducting  market  analysis  work 
independently  is  that  this  method  eliminates  prejudice.  The 
advertising  agency,  whether  or  not  its  market  surveys  actually 


94  MARKET  ANALYSIS 

rcconunend  advertising  appropriations,  is  looked  at  askance  by 
many  business  men  on  account  of  this  possible  ulterior  motive. 
Likewise,  the  industrial  engineer  who  specialises  in  production 
problems  is  apt  to  have  his  vision  somewhat  deflected  from  the 
point  at  issue.  The  company  which  conducts  its  own  department 
for  the  sole  purpose  of  market  analysis  work  is  likewise  apt  to 
suffer  from  failure  to  obtain  a  thoroughly  unprejudiced  perspect- 
ive. The  mere  fact  of  being  so  closely  identified  with  its  own 
problem  increases  the  difficulty  of  obtaining  in  its  accurate  values 
the  opinion  in  which  the  company  is  held  by  its  customers  and  by 
the  public  in  general. 

General  Conclusions.  Before  undertaking  a  survey  of  any 
extent,  it  is  necessary  to  come  to  a  definite  decision  as  to  which 
method  of  market  research  work  is  to  be  adopted,  and  then  to 
hold  to  it  consistently  until  the  survey  is  finished,  instead  of 
changing  horses  in  the  stream.  It  is  well  enough  for  the  surveyor 
to  learn  about  how  he  is  going  to  conduct  the  work,  but  before 
actually  undertaking  anything,  his  first  job  is  the  organization  of 
the  department.  It  is  hopeless  to  begin  without  this  organization, 
and  fooHsh  to  jump  into  the  middle  of  a  survey  without  having 
at  least  the  fundamentals  of  an  organization.  Everybody  expect- 
ing to  be  connected  with  the  work  ought  to  study  the  proposition, 
just  as  he  would  have  to  study  any  other  new  trade  or  profession. 

Having  discussed  the  methods  of  securing  data,  of  classifying 
them,  and  presenting  them,  and  having  organized  the  depart- 
ment, it  is  time  to  take  up  in  detail  the  various  factors  which  will 
enter  into  practically  every  market  investigation.  The  following 
chapters,  accordingly,  will  treat  especially  of  these  factors. 


CHAPTER  VI 
DETERMINING  THE  PROBLEM 

The  objective  of  a  market  survey  is  ordinarily  a  quantitative 
analysis  of  the  market,  rather  than  an  inquiry  into  production, 
purchasing,  or  other  phases  of  the  company's  activities.  Although 
it  may  be  difficult  to  determine  the  problem  accurately  without  a 
preliminary  investigation,  nevertheless,  for  the  sake  of  convenience, 
it  is  discussed  here  prior  to  taking  up  a  detailed  analysis  of  pre- 
liminary work. 

It  would  be  manifestly  impossible,  within  the  range  of  one 
investigation,  to  follow  out  all  the  many  avenues  of  study  which 
present  themselves.  The  main  purpose  of  the  survey  must  always 
be  kept  in  mind,  and  the  investigator  must  not  be  deflected  from  it. 

He  will  often  find  that  the  principal  objective  may  be  resolved 
into  a  number  of  secondaiy  problems,  and  he  may  find  it  possible 
to  subdivide  indefinitely.  But  it  is  essential  for  him  to  make  sure 
that  the  main  objective  is  the  correct  one,  and  that  he  is  aiming 
fairly  at  his  far-off  mark. 

No  one  can  tell,  without  knowledge  of  the  particular  business, 
what  its  marketing  problems  are.  However,  there  are  four  main 
reasons  why  market  surveys  are  made,  and  the  business  man,  in 
examining  his  own  case,  will  be  likely  to  find  that  it  falls  within 
the  limits  of  one  of  them.     These  four  classifications  are  as  follows: 

1.  Surveys  Preparatory  to  Introducing  Goods.  The  practice 
is  becoming  more  frequent,  before  placing  a  new  commodity  on 
the  market,  of  making  a  survey  with  the  purpose  of  suiting  com- 
modity and  market  to  each  other.  This  places  much  of  the  respon- 
sibility for  the  success  of  the  product  upon  the  commercial  research 
department. 

The  chief  difficulty  in  making  a  survey  of  this  kind  arises  from 
the  fact  that  the  product  as  yet  has  not  been  placed  before  the 
public,  and  that,  consequently,  it  is  not  easy  to  obtain  a  specific 
market  reaction.     To  procure  actual  facts  regarding  the  con- 

95 


96  MARKET  ANALYSIS 

sunicr's  opinion  of  the  product,  it  has  sometimes  been  the  practice 
to  make  up  and  send  out  a  certain  number  of  trial  packages.  By 
carefully  following  these  up,  it  has  been  possible  to  get  much  valu- 
able information. 

One  particular  company,  in  preparation  for  the  sale  of  a  new 
fat  used  in  cooking,  for  several  years  carried  on  experiments  simul- 
taneously in  the  laboratory  and  among  consumers,  before  the 
composition  was  found  to  be  exactly  right.  This  is  an  excellent 
example  of  the  proper  use  of  market  analysis  in  this  connection. 

But  the  failures  to  examine  markets  are  infinitely  more  numer- 
ous. The  company  ^vhich  shipped  soap  to  India  with  the  picture 
of  an  animal  on  the  wrapper  would  have  averted  failure  had  it 
taken  pains  to  study  the  religious  tenets  of  the  Hindoos  through  a 
market  survey. 

Assuming  that  the  technical  side  of  the  product  has  been 
perfected,  market  surveys  of  this  class  must  determine  in  advance 
what  demand  may  be  expected  and  how  this  demand  shall  be  met 
or  stimulated.  In  particular,  a  thorough  and  exhaustive  analysis 
of  competition  and  an  accurate  estimate  of  sales  resistance  will  be 
required. 

2.  Surveys  upon  which  to  Base  Advertising.  Before  under- 
taking an  extensive  advertising  campaign,  it  is  generally  desirable 
to  make  a  market  analysis  of  the  product.  It  is  now  generally 
agreed  that  an  efficient  advertising  plan  must  be  based  upon 
definite  and  accurate  information.  The  value  of  market  research 
in  this  connection  is  especially  evident,  since  the  results  are 
immediately  applicable.  The  conclusions  will  not  only  determine 
upon  what  appeal  to  base  the  advertising  campaign,  but  also  to 
what  particular  strata  the  appeal  should  be  directed. 

3.  Economic  Necessity  as  a  Motive.  The  force  of  competi- 
tion, an  economic  crisis,  the  necessity  for  expansion  in  markets  to 
take  care  of  increased  production,  or  other  economic  cause,  may 
make  a  market  survey  desirable.  About  once  in  so  often,  every 
business  will  encounter  economic  changes,  of  one  kind  or  another, 
and  upon  such  occasions  an  entirely  new  focus  is  necessar}\  Not 
long  ago  a  prominent  manufacturer  of  fountain  pens  found  himself 
in  this  position.  His  business  showed  a  marked  decrease  in  sales, 
the  trouble  being  mainly  due  to  active  and  energetic  competition. 
After  a  careful  market  analysis,  the  methods  of  sales  and  distribu- 


DETERMINING  THE  PROBLEM  07 

tion  then  in  vogue  were  radically  changed  along  the  line  of  the 
recommendations  made  in  the  survey  and,  as  a  result,  this  manufac- 
turer was  reinstated  in  his  former  position. 

4.  Sur/eys  of  a  Preventative  Nature.  As  everyone  knows, 
the  cycle  of  business  depression  follows  hard  on  that  of  business 
prosperity,  and  vice  versa.  Many  times  the  causes  which  precipi- 
tate the  rise  or  fall  of  the  business  barometer  are  not  visible  on 
the  surface.  Therefore,  the  fourth  occasion  for  a  market  survey  is 
as  a  predictor  of  the  future.  By  the  study  of  general  conditions 
in  business  and  in  the  industiy,  inevitable  in  such  a  survey,  it  is 
often  possible  to  forecast  the  future  of  the  business,  at  least  far 
enough  ahead  to  avoid  any  great  loss  through  sudden  economic 
change. 

The  business  man,  even  if  he  does  not  find  that  his  own  prop- 
osition falls  definitely  within  the  scope  of  any  of  the  above  four 
headings,  will  at  least  by  attempting  to  find  its  place  here  be  able 
to  classify  his  ideas  as  to  its  nature  and  to  determine  why  it  falls 
or  fails  to  fall  under  the  arbitrary  classification.  If  this  process 
succeeds  in  giving  him  a  sharply  focussed  idea  of  the  task  before 
him,  his  purpose  will  thereby  have  been  accomplished. 

The  Essence  of  Marketing  Problems.  There  are  three 
fundamental  divisions  in  every  market  analysis.  First,  there  is 
the  product,  second,  the  market,  and  third,  the  method  of  bringing 
the  product  and  the  market  together.  The  surveyor  is  likely  to 
find  room  for  improvement  under  all  of  these  headings.  It  is  one 
of  the  chief  functions  of  the  preliminary  work  to  ascertain  where 
these  weaknesses  lie.  Upon  this  diagnosis,  the  campaign  may  be 
mapped  out  in  advance. 

1.  When  the  problem  concerns  chiefly  the  product,  there  search 
work  is  of  two  kinds,  along  lines  of  technical  change,  and  along 
lines  of  consumer  tests. 

a.  Technical  Tests.  There  may  be  something  wrong  with  the 
nature  of  the  product  itself,  with  its  engineering  principles,  or 
otherwise.  After  comparison  with  competing  goods,  and  hearing 
a  few  criticisms,  the  analyst  may  decide  whether  there  is  any  radical 
defect.  A  manufacturer  of  electric  irons,  under  such  circum- 
stances, made  a  market  survey  and,  as  a  result,  modified  his 
product,  changing  the  position  of  the  cord,  the  weight  of  the  iron, 
etc.,  in  such  a  manner  as  to  fit  the  average  housewife's  ideas  of 


98  MARKET  ANALYSIS 

what  an  electric  iron  should  be.  Another  market  survey  along 
the  same  lines  showed  that  an  automobile  universal  joint  was 
unanimously  condemned  by  customers  because  of  a  slight  defect 
in  the  means  for  retaining  lubricant.  As  a  matter  of  fact,  most 
market  surveys  call,  at  least,  for  minor  changes  in  the  product. 

b.  Customer  and  Consumer  Tests.  The  psychological  appeal  of 
the  product  may  be  wrong.  It  may  be  packaged  incorrectly,  the 
color  of  the  wrapper  unsuitable,  or  in  some  other  way  the  method 
of  presentation  to  the  consumer  be  ill  chosen.  Errors  of  this  sort 
may  frequently  be  discovered  by  direct  application  to  the  cus- 
tomers and  consumers  themselves. 

As  an  example  of  such  an  error,  the  following  is  instructive. 
The  manufacturer  of  a  toilet  preparation  arbitrarily  increased  the 
size  of  the  package  to  a  point  where  it  had  to  be  sold  for  fifty  cents. 
Much  trouble  was  experienced  because  of  the  contents  hardening 
before  being  used  up.  In  accordance  with  this  dissatisfaction, 
sales  fell  off.  It  might  have  been  determined  easily,  by  con- 
sulting customers  in  advance  as  to  the  change,  that  a  tube  half 
as  large  would  be  consumed  before  the  contents  had  deteriorated, 
and  would  thus  command  greater  sales.  The  methods  of  making 
consumer  tests  are  usually  so  obvious  as  to  be  very  easy  to  carry 
out.  Some  hints  as  to  conducting  them  will  be  found  in  the 
chapter  on  "  Methods  of  Securing  Data." 

2.  If  the  problem  has  to  do  with  the  market,  that  is,  with  the 
extent,  character,  and  habits  of  its  buying  public,  then  the  majority 
of  the  surveyor's  work  will  be  in  the  field.  In  introducing  a  new 
product,  his  task  is  largely  limited  to  a  study  of  the  market.  As 
an  example  of  this,  not  long  ago  a  readily  portable  but  high- 
powered  searchlight  was  invented.  The  ow^ners  of  the  device 
were  uncertain  in  what  quarters  to  market  it.  Through  the 
medium  of  a  market  survey,  the  searchlight  was  found  to  be 
adapted  for  sportsmen's  use,  for  police  and  fire  departments,  for 
guarding  prisons,  for  emergency  equipment  for  high  tension 
electric  lines,  as  life-boat  equipment,  and  so  on.  This  is  one  of 
those  cases  where  an  article  does  not  admit  of  much  modification, 
and  where  the  surv^eyor's  task  is  primarily  to  find  people  who  are 
ready  to  use  it  in  its  present  form. 

3.  If  the  problem  has  to  do  with  merchandising  methods, 
the  aim  of  the  research  will  be  to  determine,  through  a  study 


DETERMINING  THE  PROBLEM  99 

of  the  market,  the  product,  and  competition,  what  form  of  dis- 
tribution and  what  merchandising  methods  are  most  suitable. 
The  manufacturer  may  find,  for  instance,  that  his  sales  increase 
much  more  rapidly  in  territories  where  they  are  stimulated  by 
intensive  local  advertising,  after  national  advertising  alone  has 
proved  inadequate.  Problems  of  this  nature  are  solvable  only 
after  a  thorough  examination  of  the  entire  sales  and  distributive 
systems. 

Almost  any  problem  will  have  to  do  not  only  with  the  market, 
the  product,  and  the  means  for  bringing  the  two  together,  but 
will  be  tied  in  with  all  three.  In  fact,  it  is  noticeable  in  the  above 
examples  that  there  is  no  veiy  definite  reason  why  they  should 
be  in  one  class  rather  than  in  another.  After  all,  it  is  not  neces- 
sary to  classify  the  problems  for  the  mere  sake  of  classification, 
unless  by  so  doing  it  is  of  some  assistance  in  their  solution. 

The  Indefinite  Character  of  Marketing  Problems.  One  of  the 
trying  things  about  market  analysis  work  is  its  indefiniteness. 
There  seems  to  be  nothing  tangible.  The  most  one  can  hope  to 
do  is  to  arrive  at  approximations.  Every  attempt  at  accuracy 
and  precise  formulation  of  data  reveals  the  difficulties  of  obtaining 
exact  and  reHable  figures.  In  fact,  the  very  attempt  to  get  figures 
down  to  too  fine  a  point  often  proves  dangerous,  since  market 
data  which  can  be  obtained  very  exactly  are  apt  to  be  so  limited 
or  so  local  as  not  to  be  representative. 

The  market  analyst  is  constantly  having  to  make  estimates 
and  allowances.  A  great  part  of  his  work,  indeed,  is  calculating 
errors.  Again,  he  is  dealing  with  averages,  and  these  are  always 
baffling.  Finally,  in  part  of  his  work,  at  least,  he  has  to  do  with 
the  future.  And  such  little  progress  has  been  made  in  the  science 
of  prediction,  that  much  guesswork  is  bound  to  enter. 

|The  problem  before  the  market  surveyor  is  not  at  all  like 
a  problem  in  geometry.  He  has  no  theorems  to  demonstrate.  In 
fact,  he  is  fortunate  if  the  problem  is  set  before  him  at  all.  He 
is  asked  to  undertake  a  survey  of  the  market,  and  left  to  his  own 
devices.  Vague  as  this  is,  it  is  probably  better  than  being  con- 
fronted with  an  array  of  premises,  drawn  up  hurriedly  by  an 
executive  with  neither  the  perspective  nor  the  training  to  qualify 
him  for  this  most  difficult  research  task. 

Admittedly,   it   is   impossible   to  complete   a  market  survey 


100  MARKET  ANALYSIS 

with  the  same  de{2;rcc  of  finality  with  which  a  manufacturing 
operation  or  a  game  of  golf  may  be  completed.  Still,  the  surveyor 
cannot  be  too  often  reminded  of  the  importance  of  continuously 
keeping  his  eyes  on  the  goal.  The  mere  machinery  used  in 
investigating  has  often  proved  so  fascinating  to  the  novice  that  it 
has  absorbed  his  time  and  attention,  and  he  has  found,  when 
close  to  what  he  supposed  to  be  the  end,  that  he  had  not  obtained 
the  essential  information. 

Dividing  the  Problem.  The  resolving  of  the  main  issue  into 
its  various  components  will  try  the  resourcefulness  of  the  keenest 
business  man.  As  a  rule,  it  is  better  not  to  attempt  too  fine  a 
division  until  the  preliminary  survey  has  been  completed,  although 
one  should  always  be  on  the  lookout  for  indications  of  what  are 
the  really  vital  considerations  and  the  methods  for  disclosing  them. 
An  example  of  major  and  minor  problems  will  occur  to  any  com- 
pany which  has  attempted  to  distribute  its  goods  through  both 
jobber  and  dealer  channels.  Here,  of  course,  the  distribution  of 
the  goods  themselves  is  the  major  problem,  while  the  minor  prob- 
lems are  those  of  determining  the  discounts  allowable  to  the 
various  classes  of  middlemen,  the  question  of  whether  a  dealer 
handling  a  large  volume  is  entitled  to  jobber  discounts,  etc. 
The  surveyor  will  be  confronted  by  such  a  network  of  non-essential 
and  routine  details,  which  keep  cropping  up  in  the  course  of  this 
work,  that,  unless  suitable  assistants  are  provided,  he  will  find 
himself  in  danger  of  being  diverted  from  that  all-important  main 
issue. 

One  good  way  to  go  about  isolating  the  several  factors  in  the 
analysis  is  to  divide  the  main  problem  into  a  series  of  key  problems 
which,  when  solved,  will  combine  to  serve  as  a  solution  for  the 
major  problem,  just  as  the  marine  draftsman,  by  finding  the  cor- 
rect location  of  a  few  points,  can  carry  his  spline  up  to  them,  and 
draw  a  fair  water-line  curve. 

The  investigator's  purpose  should  be  to  divide  his  problem 
into  its  logical  components,  and  to  consider  each  of  these  compo- 
nents as  a  separate  entity.  The  only  real  trouble  with  this  plan 
is  that  the  moment  a  marketing  problem  is  cut  off  from  its  sur- 
roundings it  ceases  to  have  life  and  reahty. 

Determining  the  problem  and  planning  how  to  solve  it  are 
both  halves  of  the  same  orange.     One  must  first  decide  what  in- 


DETERMINING  THE  PROBLEM  101 

formation  will  have  to  be  obtained  to  settle  the  question  at  issue; 
but  simultaneously  it  must  be  decided  whether  or  not  it  is  possible 
and  practicable  to  obtain  that  information. 

The  questions  which  an  investigator  sets  himself  to  answer 
must  be  of  such  a  nature  that  he  can  gather  sound  evidence 
for  their  solution.  Following  are  two  tests  which  he  should  put 
to  every  line  of  investigation  which  opens  up: 

(1)  Will  this  line  of  investigation  furnish  data  which  will  solve, 
or  help  to  solve,  one  of  my  key  problems? 

(2)  Is  this  line  of  investigation  one  which  it  is  possible  and 
feasible  to  cany  out? 

Conclusions.  A  Sherlock  Holmes  deals  with  only  a  single 
criminal.  A  production  engineer  has  only  one  machine  to  cope 
with,  or  one  department,  or,  at  most,  a  single  plant.  The  market 
surveyor  ordinarily  has  a  field  large  in  geographical  extent,  and 
made  up  of  such  a  motley  of  distributors,  middlemen,  and  ultimate 
consumers  that  he  can  hardly  expect  to  count  them. 

It  is  as  difficult  to  plan  a  market  survey  campaign  in  its  entirety 
as  it  is  to  plan  a  military  campaign  in  advance.  Here  again  it  is  a 
matter  of  expediency — the  surveyor  cannot  guard  against  every 
eventuality;  he  must  be  continually  on  the  watch. 

Still,  it  is  common  to  find  that  the  plan  of  campaign  will 
begin  to  evolve  itself  when  the  problems  themselves  have  been 
determined.  It  should  be  planned  as  far  in  advance  as  possible. 
Indeed,  if  the  entire  problem  could  be  determined  at  the  outset, 
there  would  be  nothing  to  hinder  planning  every  step  before  a 
single  move  was  made.  Unfortunately,  however,  even  after  the 
preliminary  survey  has  been  made,  the  problem  is  still  not  quite 
determined,  and  there  arc  always  plans  of  attack  which  cannot  be 
formulated  until  the  last  moment. 

Once  the  preliminary  report  has  been  submitted,  the  surveyer 
should  have  a  fairly  concrete  idea  of  what  information  he  must  get 
in  order  to  draw  sound  conclusions,  and  also  how  to  procure 
that  information.  He  must  decide  how  much  time  is  to  be 
allowed  for  making  the  study,  and  how  much  money  is  available, 
and  he  must  lay  his  plans  accordingly.  He  prepares  a  list  of 
sources  of  information,  and  decides  how  he  is  going  to  tap  these 
sources.  He  makes  up  a  number  of  questionnaires,  and  plans  for 
certain  interviews.     He  makes  ready  to  carry  onward  the  bibho- 


102  MARKET  ANALYSIS 

graphical  work  which  was  started  during  the  prehminary  survey. 
He  reflects  upon  the  form  in  which  his  final  report  is  to  be  written. 
He  even  considers  what  he  will  need  in  the  way  of  charts,  diagrams, 
and  other  means  of  illustrating  it. 

The  following  chapters  are  intended  to  outline  various  consider- 
ations to  which  the  surveyor  will  have  to  give  his  attention  in 
practically  any  survey;  and  it  is  important  that  he  be  conversant 
with  all  of  these  considerations  while  his  campaign  is  still  in  a 
formative  stage. 


CHAPTER  VII 
THE  PRELIMINARY  ANALYSIS 

Outline 

What  is  the  purpose  of  a  preUminary  survey? 

(a)  To  form  a  conception  of  the  scope,  method,  and  possible  results  of 

the  analysis. 

(b)  To  allow  the  formation  of  first  impressions. 

(c)  To  secure  the  approval  of  the  company's  executives. 

How  should  the  preliminary  work  be  conducted? 

(a)  The  internal  point  of  view.     What  does  the  company  think? 

(1)  How  should  information  be  secured  from  the  various  departments? 

(a)  The  necessity  for  tact. 

(b)  The  value  of  being  a  good  listener. 

(c)  A  preliminary  questionnaire. 

(d)  The  disadvantages  of  taking  notes. 

(2)  Are  conferences  desirable? 

(a)  The  opportunity  afforded  for  getting  acquainted. 
(6)  The  disadvantages  of  the  conference  being  dominated  by  a 
single  individual  and  the  danger  of  arousing  animosity. 

(6)  The  external  point  of  view.     What  does  the  public  think? 

(1)  What  preliminary  information  should  be  obtained  outside? 
(a)  The  outside  impression  of  the  company  and  its  product. 
(6)  The  salient  facts  about  the  industry  in  general. 

(c)  Competition. 

(1)  Obtain  catalogues. 

(2)  Advertising  in  trade  periodicals,  etc. 

(d)  The  buying  public. 

(1)  Personal  interview  with  two  or  three  customers. 

What  is  the  practical  value  of  the  preliminary  analysis? 

(a)  The  definite  working  policy  resulting  from  a  comparison  of  the  two 
angles  of  approach,  the  internal  and  the  external. 

{b)  The    brief    space    of    time    required    to    assemble    the    preliminary 
information. 

103 


104  MARKET  ANALYSIS 

What  should  the  preliminary  report  contain? 

(a)  An  outline  of  the  final  report. 

(b)  A  digest  of  impressions  received. 

(c)  The  plan  for  proceeding  with  the  work. 

(d)  Preliminary  conclusions. 

What  may  result  from  submitting  the  preliminary  report? 

(a)  Authority  to  proceed  along  scheduled  plan. 

(b)  Expression  of  opinion  from  company  officials  as  to  work. 

(c)  Additional  information  along  lines  not  covered  in  preliminary  report. 


CHAPTER  VII 
THE  PRELIMINARY  ANALYSIS 

The  preliminary  work  affords  an  opportunity  to  obtain  a 
broad  view  before  becoming  immersed  in  the  detail  incident  to  a 
close  study  of  the  company  in  all  the  phases  of  its  activity. 

No  man,  however  experienced  he  may  be,  can  plan  out  his 
survey  work  accurately  without  securing  an  adequate  amount  of 
advance  information.  The  preliminary  survey  gives  the  investi- 
gator an  opportunity  to  ascertain  the  company's  ailments,  just  as 
a  physician  makes  a  diagnosis. 

The  Purpose  of  the  Preliminary  Report.  The  object  of  making 
a  preliminary  investigation  is  to  crystallize  in  the  mind  of  the 
investigator  and  of  the  company's  executives  just  what  questions 
the  survey  is  to  deal  with,  and  in  general  to  bring  out  as  specifically 
as  possible  the  various  factors  which  will  contribute  to  a  solu- 
tion of  the  marketing  problem.  For  example,  in  an  investigation 
of  the  market  for  ball-bearing  cotton  spindles,  it  took  the  surveyor 
but  three  days  to  find  out  that  the  trade  was  unanimously  opposed 
to  this  innovation.  The  objective  was  thus  defined  almost  at 
the  beginning.  This  is  a  clarifying  process,  and  will  have  three 
very  definite  results: 

(1)  It  will  not  only  stimulate  the  minds  of  those  involved, 
but  will  also  focus  their  interest  upon  the  various  issues  in  question, 
and  will  be  the  nucleus  of  a  definite  conception  of  the  task.  The 
preliminary  study  reveals  what  is  to  be  done,  and  also  points  the 
way  to  the  method  of  conducting  the  work  and  should  further 
foreshadow  the  results  which  the  completed  survey  is  to  bring 
about. 

(2)  The  preliminary  survey  will  allow  the  investigator  to 
express  his  first  impressions  in  an  off-hand  and  daring  manner  more 
conducive  to  brilliant  analysis  than  the  plodding  procedure  which 
he  must  inevitably  follow  in  the  amassing  of  substantial  evidence. 

(3)  Partly,  also,  it  is  desirable  to  make  a  brief  preliminary 

105 


lOG  MARKET  ANALYSIS 

study  in  order  that  the  first  report  may  have  the  approval  of  the 
company's  exeout ives.  This  gives  them  an  opportunity  to  examine 
the  nature  of  the  work,  and  to  understand  rather  exactly  in  what 
direction  the  time  and  the  money  appropriated  are  to  be  spent. 

The  Internal  and  External  Viewpoints.  Every  market  problem 
may  well  be  attacked  from  two  angles,  the  internal,  that  is  from  the 
inside  of  the  organization  looking  out,  and  the  external,  from  the 
outside  looking  in.  The  fusion  of  these  two  viewpoints  should 
enable  the  surveyor  to  form  an  accurate  judgment  of  the  whole 
proposition. 

To  avoid  confusion,  he  should,  if  possible,  have  at  least  one 
assistant.  Whichever  individual  undertakes  the  internal  study  is 
in  some  danger  of  losing  his  perspective.  His  mind  becomes  filled 
with  the  arguments  of  policy  and  expediency  advanced  by  the 
heads  of  various  departments  and  by  their  subordinates.  The 
broader  aspects  of  the  question  are  apt  to  escape  him. 

The  external  attack  makes  clear  not  only  what  the  outside 
world  thinks  of  the  company  and  of  the  product,  but  it  also  deals 
with  the  theoretical  considerations  of  the  ideal  way  in  which 
to  conduct  such  a  business,  judging  it  wholly  without  reference  to 
the  particular  disadvantages  under  which  the  company  may  labor. 

It  can  easily  be  seen  that  when  the  results  of  these  two  separate 
investigations  are  compared,  a  much  better  policy  can  be  formu- 
lated than  if  one  mind  had  attempted  to  perform  the  entire  task. 

The  Internal  Point  of  View.  The  inside  investigation  is 
necessarily  made  at  the  company's  plant  and  offices.  In  this 
preliminary  work  it  is  desirable  to  elicit  as  much  information  as 
possible  from  everyone  connected  with  the  organization.  A 
thorough  examination  of  sales  and  purchasing  records,  etc.,  will 
come  later,  but  in  the  beginning  it  is  vital  to  get  the  reaction  of 
the  personnel. 

The  investigator  at  this  stage  of  the  proceedings  does  what 
the  newspaper  reporter  does — he  interviews  everybody.  Even  if 
he  does  not  know  a  great  deal  about  the  business,  he  will  all  the 
more  readily  absorb  impressions  and  make  a  complete  picture  of 
them.  An  untutored  mind  may  often  see  great  market  possibili- 
ties. It  was  a  woman  who  had  never  but  once  been  in  a  glass  works 
who  was  responsible  for  the  idea  of  "  Pyrex  "  glassware  for  cooking. 

The  surveyor  will  find  that  he  cannot  avoid  discussing  matters 


THE  PRELIMINARY  ANALYSIS  107 

to  a  considerable  extent  with  some  of  the  executives  of  the  com- 
pany. They  will  undoubtedly  have  some  very  definite  opinions 
and  be  anxious  to  express  them,  though  there  is  always  danger 
in  attaching  too  much  weight  to  them. 

Another  thing  the  investigator  is  likely  to  encounter  is  that  of 
hearing  too  much  about  the  history  of  the  business,  especially  of 
its  darker  side.  A  certain  amount  of  information  on  this  score  is 
well  enough,  but  it  is  almost  inevitable  that  he  will  have  to  call  a 
halt  and  refuse  to  listen  to  the  tribulations  which  have  been  passed 
through. 

The  surveyor  should  avoid  being  too  aggressive.  On  the  other 
hand,  although  it  is  desirable  to  maintain  something  of  the  atti- 
tude of  the  cold-blooded  scientist,  there  is  danger  of  overdoing 
this  and  becoming  disliked.  One  of  the  greatest  assets  a  man  can 
have  at  this  stage  is  that  of  being  a  good  listener.  There  is  sure 
to  be  someone  at  the  plant  who  is  only  waiting  for  a  chance  to 
imburden  his  or  her  mind,  and  who  will  be  glad  to  tell  the  whole 
story  from  beginning  to  end. 

Departmental  Sources  of  Information.  There  is  much  neces- 
sary information  that  should  be  obtained  from  the  departments 
themselves.  And  here  is  where  the  tactfulness  of  the  investigator 
must  be  employed  to  its  fullest  extent.  Most  people  resent  any- 
thing in  the  nature  of  personal  investigation,  if  it  is  followed  out 
as  such.  The  head  of  a  department  regards  the  scope  of  his 
activities  as  definitely  his  own.  He  is  likely  to  object  to  an  out- 
sider's probing  into  the  results  of  what  he  has  accomplished  or 
failed  to  accomplish.  Although  this  hostility  may  not  be  expressed 
openly,  the  investigator  can  feel  it  in  the  air.  He  is  afforded  only 
the  assistance  which  he  demands.  That  spontaneous  informa- 
tion, which,  after  all,  is  oftentimes  the  most  valuable,  is  with- 
held. 

Considerable  time  must,  of  course,  be  spent  with  the  sales 
manager,  or  in  the  sales  department.  Information  from  this 
source  is  of  much  importance,  because  it  will  show  what  has  been 
done  by  the  company  in  developing  its  markets.  In  the  pre- 
liminary work,  not  much  more  can  be  done  than  to  get  the  general 
history  of  past  activities  and  the  ideas  of  the  sales  department  as 
to  the  future.  An  examination  of  the  records  will  come  later  to 
be  used  as  corroboratory  and  graphic  evidence. 


108  Af ARRET  ANALYSIS 

But  it  is  inadvisable  to  devote  too  much  time  to  the  sales 
department  and  to  the  study  of  sales  problems  pure  and 
simple. 

One  method  commonly  followed  in  obtaining  information 
from  the  various  departments  is  by  means  of  a  sort  of  oral  ques- 
tionnaire. This  is  submitted  to  the  various  heads  and  the  answers 
to  it  recorded,  thus  saving  much  work  on  the  part  of  the  inves- 
tigator. The  advantage  of  such  a  questionnaire  is  first,  that  it 
eliminates  the  possibihty  of  omitting  certain  important  consider- 
ations, and  second,  it  makes  progress  easier  and  more  rapid  than 
where  no  methodical  procedure  is  followed.  Also,  it  gives  one  an 
excellent  variety  of  opinions.  In  one  investigation  when  six  execu- 
tives were  asked  what  was  the  most  important  problem  facing 
their  business,  no  two  gave  the  same  answer.  Although  this  is  an 
unusual  state  of  affairs,  it  nevertheless  indicates  the  necessity  of 
obtaining  views  from  several  sources. 

Of  course,  there  are  always  a  certain  number  of  special  questions 
which  come  up.  Consequently,  no  slavish  following  of  a  set 
questionnaire  is  in  itself  sufficient.  The  best  way,  perhaps,  in  the 
preliminary  work,  is  to  have  a  general  idea  of  what  questions  to 
ask  and  to  elicit  the  answers  tactfully  and  with  little  apparent 
guidance.  It  is,  of  course,  often  inexpedient  for  the  interviewer  to 
refer  to  a  list  of  questions.  Even  to  take  notes  during  an  inter- 
view is  very  apt  to  cause  a  man  to  withhold  his  opinions.  If 
possible,  a  good  way  is  to  make  notes  after  talking  with  each  execu- 
tive, and  especially  to  write  down  any  general  impressions  which 
have  come  to  mind.  The  value  of  these  preliminary  field  notes  is 
very  real.  While  he  is  doing  this,  the  surveyor  will  have  an  oppor- 
tunity to  check  up  and  find  out  whether  any  important  points  have 
been  neglected. 

Holding  Conferences.  It  is  frequently  the  custom  to  initiate 
the  market  investigator  by  means  of  a  preliminary  conference. 
Thus  he  should  have  gained  a  general  idea  of  the  problems  involved 
even  before  he  goes  to  the  plant.  He  will  doubtless  have  been  told 
what  the  questions  at  issue  are  and  what  particularly  is  required 
in  the  way  of  speciahzed  investigation.  There  have,  however, 
been  cases  in  which  this  preliminary,  impression  either  through 
malice  or  unintentionally,  was  distorted  to  such  an  extent  that  it 
did  not  reflect  the  actual  complexion  of  the  case.     The  conference 


THE  PRELIMINARY  ANALYSIS  109 

gives  the  investigator  an  opportunity  to  size  up  the  problem  as  the 
company  sees  it. 

One  of  the  greatest  values  of  the  preliminary  conference  is  the 
opportunity  it  offers  for  getting  acquainted  at  the  beginning  with 
as  many  of  the  personnel  as  possible.  The  men  make  the  organi- 
zation, and  their  individual  characters,  taken  collectively,  form  the 
character  of  the  group.  The  investigator  has  a  chance  here  to 
observe  the  various  personalities  and  their  relations  with  each 
other. 

A  conference,  however,  in  the  average  industrial  organization, 
is  apt  to  be  dominated  by  a  single  individual,  more  especially  in 
cases  where  there  is  a  stranger  present.  It  is,  therefore,  essential 
that,  whether  there  is  a  conference  or  not,  the  executives  should 
be  interviewed  separately  and  their  views  on  marketing  and 
other  problems  elicited.  Unless  the  investigator  is  used  to  con- 
ferences, he  will  find  the  latter  a  less  trying  means  for  obtaining 
opinions. 

The  preliminary  conference  should  in  any  case  be  limited  in  so 
far  as  possible  to  the  discussion  of  such  points  as  the  investigator 
himself  brings  forward.  His  primary  function  is  not  in  tabulating 
the  opinions  of  everybody  on  whatever  subjects  they  may  care 
to  discuss,  but  of  finding  the  facts,  and  from  them  drawing  the 
logical  conclusions.  This  he  can  accomplish  most  effectively  if 
he  act  as  the  spokesman  of  the  meeting  and  lead  it  on  to  take  up 
the  various  matters  laid  down  in  previously  arranged  plans. 

There  is  likelihood  that  too  long  or  too  free  a  conference, 
especially  at  the  beginning,  will  stir  up  animosity  of  one  sort  or 
another.  It  may  even  tend  to  reflect  discredit  on  someone. 
Oftentimes  market  surveys  are  made  because  the  sales  department 
or  some  other  branch  of  the  business  has  not  been  up  to  standard. 
The  position  of  the  market  investigator  is  accordingly  a  dehcate 
one.  It  takes  considerable  resourcefulness  on  his  part  to  be 
diplomatic,  and  to  say  the  right  thing,  while  his  mind  is  concen- 
trated on  the  very  difficult  problem  of  unearthing  baffling  facts. 

The  preliminary  investigation  is  not  a  place  for  the  surveyor's 
expression  of  opinions.  It  is  simply  for  obtaining  information. 
An  ill-considered  opinion  at  this  stage  may  prejudice  everyone. 
Much  information  will  come  through  direct  observation,  and  from 
the  Uttle  offhand  remarks  which  come  to  him  here  and  there,  per- 


110  AfARKET  ANALYSIS 

haps  through  a  foreman,  or  a  man  at  the  bench.  But  even  asking 
questions  is  a  difficult  tiling  to  do.  In  the  first  place,  it  is  hard  to 
fornuilate  queries  which  shall  really  strike  at  the  heart  of  the 
matter.  In  the  second  place,  there  are  many  questions  which 
executives  either  cannot  answer  or  do  not  care  to. 

It  is  better,  therefore,  if  there  is  to  be  a  preliminary  conference, 
not  to  propound  too  many  questions,  since  there  is  always  the 
danger  of  maldng  someone  present  feel  imcomfortable,  and  in 
thus  arousing  antagonism.  The  surveyor  must  remember  there 
is  often  a  certain  amount  of  aversion  to  his  work;  and  it  is  better, 
if  there  seems  to  be  any  hesitation  in  answering  questions,  not 
to  press  them,  since  those  answers  which  are  not  willingly  and 
directly  given  may  prove  misleading.  Then  again,  there  are  few 
questions  which  the  investigator  cannot  answer  for  himself  if  he 
is  given  the  privilege  of  going  into  the  plant  and  of  meeting  the 
other  members  of  the  organization.  What  one  man  refuses  to 
talk  about,  the  next  will  be  only  too  pleased  to  dwell  upon.  Care, 
of  course,  must  be  taken  not  to  discuss  matters  promiscuously, 
especially  before  subordinates. 

The  External  Point  of  View.  The  external  research  is  fully  as 
important  as  the  internal.  They  should  if  possible  be  carried  on 
simultaneously,  with  a  view  to  having  both  completed  at  the  same 
time.  Of  course,  the  real  purpose  of  all  the  preliminary  work  is  to 
evolve  a  logical  plan  of  campaign,  and  too  much  time  must  not 
be  spent;  only  enough  to  get  a  grasp  of  the  subject.  The  func- 
tions of  the  external  survey  are  more  or  less  predetermined.  The 
surveyor  must  find  out  what  he  can  about  the  company,  about 
the  industry  in  general,  about  the  competition  directly  affecting 
the  company  and  the  opinions  of  any  customers  that  can  readily 
be  reached.  In  one  survey  of  a  manufactured  product  the  infor- 
mation furnished  by  a  single  jobber,  interviewed  at  the  outset, 
gave  the  gist  of  the  standpoint  of  jobbers  throughout  the  country. 

I.  The  Company.  There  is  a  great  deal  of  outside  information 
that  can  readily  be  obtained  concerning  the  general  aspects  of  the 
company  in  question,  its  reputation,  standing  in  the  community, 
credit,  temper,  and  character.  It  will  not  be  surprising  if  the 
external  findings  do  not  harmonize  with  those  from  within.  An 
investigator  studying  the  market  for  an  automobile  part  was  told 
by  the  manufacturer  that  it  was  the  best  thing  to  be  had.     But 


THE  PRELIMINARY  ANALYSIS  111 

when  he  got  out  in  the  field  he  was  told  that  it  was  not  good 
enough  for  any  modern  automobile. 

The  previous  discussions  had  to  do  with  what  the  company  and 
its  officials  thought  of  themselves;  the  present  question  is  finding 
out  what  the  outside  world  thinks  of  the  company,  and,  in  a 
general  way,  of  its  products.  The  purpose  is  only  to  gain  a  general 
impression,  merely  enough  to  check  up  with  the  other  viewpoint. 

2.  The  Industry  in  General.  This  information  is  chiefly  biblio- 
graphical, obtained  at  the  library,  the  newspaper  office,  etc. 
It  consists  largely  of  making  a  preliminary  survey  of  the  literature 
existing  on  the  subject.  When  this  is  done,  arrangements  can  more 
easily  be  made  for  obtaining  and  consulting  books  and  pamphlets. 
The  general  idea  gained  will  convey  the  size  of  the  industry, 
something  of  its  history  and  peculiarities,  what  people  think 
its  future  wiU  be,  etc.  The  surveyor  should  not  fail  to  do  some 
library  work,  even  at  the  beginning.  A  glance  through  a  few  books 
on  the  packing  industry  will  give  him  a  very  different  viewpoint 
from  that  he  obtains  by  strolling  through  the  Chicago  stockyards. 

3.  Competition.  The  study  of  competition  is  particularly' 
attractive  because  of  the  speedy  results  to  which  it  leads  in  the 
way  of  affording  a  clear  perspective  of  the  industry.  The  study  of 
competition  has  never  been  pursued  to  its  possible  or  profitable 
extent  by  most  businesses.  If  reliable  information  can  be  obtained 
on  this  head,  it  may  be  of  incalculable  benefit. 

One  of  the  first  things  to  do  is  to  obtain  all  possible  literature 
and  information  about  the  company's  competitors.  Competition 
may  be  of  several  kinds.  It  may  be  competition  of  one  firm  with 
another,  or  it  may  be  competition  with  a  different  sort  of  product 
entirely.  A  manufacturer  of  cotton  toweling,  for  instance,  has  to 
compete  not  only  with  other  manufacturers  of  cotton  toweling,  but 
with  those  of  linen  toweling  as  well. 

Catalogues  in  many  lines  of  business  give  a  great  deal  of  infor- 
mation, and  the  practical  investigator  can  tell,  by  examining  them, 
much  about  the  character  of  the  organization  behind  them. 

It  is  not  too  early,  even  at  this  preliminary  stage,  to  start 
clipping  from  trade  journals,  newspapers,  and  magazines,  any 
advertisements  of  rival  concerns.  The  competitive  methods  of 
advertising  and  merchandising  will  undoubtedly  form  an  important 
part  of  the  investigation.     What  work  it  is  possible  to  do  in  the 


112  MARKET  ANALYSIS 

first  few  days  will  be  sufficient  for  the  formation  of  an  opinion  as 
to  the  methods  of  publicity  cnij^loj'cd  in  the  industry  and  a  cor- 
responding opinion  of  the  company's  methods  when  compared 
with  those  of  its  competitors. 

4.  The  Buying  Public.  The  general  attitude  of  the  buying 
pubhc  towards  the  product  of  the  company  and  the  policies  of  the 
company  will  be  an  excellent  index  of  the  success  or  failure  of 
its  merchandising  methods.  Some  market  investigations  which 
have  been  confined  exclusively  to  reporting  interviews  with  cus- 
tomers have  been  remarkably  comprehensive,  in  spite  of  the  limi- 
tations of  so  narrow  a  method  of  approach. 

Certainly,  the  preliminary  investigation  cannot  go  far  in 
obtaining  the  views  of  customers,  but  a  personal  interview  with 
three  or  four  local  dealers  or  jobbers  may  do  much  to  reveal  the 
prominent  points  of  grievance.  Customers  are  as  a  rule  willing 
to  express  themselves  freely.  In  fact,  they  are  usually  more  likely 
to  say  what  they  think  of  the  company  and  its  product  than  any- 
one else.  Customers  who  are  no  longer  customers  may  have  the 
most  constructive  criticisms  to  make.  But  customers  may  say 
commendatoiy  things.  They  may  even  show  opportunities  for 
extending  the  sale  of  a  product.  A  study  of  consumer  demand 
for  linoleum  showed  that  it  had  a  wider  use  than  merely  for 
kitchen  floors,  for  which  purpose  it  was  originally  sold.  Large 
quantities  are  now  sold  for  other  parts  of  the  house. 

Comparing  Results.  The  true  results  of  the  preliminary  work 
do  not  appear  until  the  findings  of  the  internal  and  external  studies 
have  been  analyzed  and  compared.  Two  definite  and  concrete 
conceptions  will  have  been  formed,  and  now  comes  the  task  of 
reconciling  and  unifying  them.  In  many  points,  of  course,  the 
information  gathered  will  not  conflict  at  all,  the  field  not  having 
being  duplicated,  but  it  will  probably  be  found  that  the  two 
points  of  view,  when  they  bear  on  the  same  subject,  will  not 
always  reveal  the  same  condition.  It  is  this  difference  which 
must  be  scrutinized.  A  conference  should  now  be  held  to  settle, 
upon  the  evidence  as  it  stands,  approximately  what  the  case 
amounts  to. 

As  to  the  time  which  it  would  require  to  carry  the  investigation 
to  this  point,  it  need  not  be  very  long.  It  should  be  possible  to 
get  the  "  inside  "  information  within  a  day  or  two,  or  even  less, 


THE  PRELIMINARY  ANALYSIS  113 

in  the  case  of  a  moderate-sized  business.  An  investigation  of  a 
concern  manufacturing  electrical  wiring  devices  was  completed  by- 
one  man,  under  pressure,  in  twenty-four  hours.  It  will  take 
another  day,  at  the  least,  however,  to  record  the  findings,  get 
field  notes  in  order,  and  dictate  an  outhne  of  first  impressions. 

Obtaining  the  outside  point  of  view  will  probably  take  more 
time.  Nevertheless,  in  this  latter  case,  notes  can  be  made  up  as 
the  investigation  goes  along.  As  a  matter  of  fact,  in  the  ordinaiy 
survey  of  a  small  business,  sufficient  material  for  the  preliminary 
analysis  should  be  obtained  by  two  men  within  three  or  four  days. 

Writing  the  Preliminary  Report.  If  the  procedure  has  been 
carried  out  as  outlined,  there  will  already  be  a  considerable  amount 
of  data  in  fairly  well  classified  form  which  can  be  embodied  in  the 
preliminary  report.  This,  of  course,  is  intended  to  serve  merely  as 
a  foundation  for  the  final  report. 

Careful  consideration  should  be  given  at  this  point  to  the 
best  method  of  presentation.  The  actual  work  of  analyzing 
facts,  figures,  and  opinions  is  the  embodying  of  these  data  in 
readable  or  graphic  form. 

Due  attention  should  be  given  not  only  to  the  facts  and  findings 
of  the  report,  as  it  is  to  appear  when  completed,  but  also  to  the  form 
in  which  these  facts  are  to  be  presented  in  the  prehminary  report. 
In  other  words,  the  preliminary  report  should  attempt  to  be 
everything  that  the  final  report  is,  except  that  it  will  be  in  skeleton 
form,  not  containing  such  complete  evidence,  nor  will  the  conclu- 
sions and  recommendations  be  so  full.  But  in  general,  the  pre- 
liminary report  ought  to  follow  the  same  form  as  the  completed 
report. 

Ordinarily,  it  is  better  to  write  out  all  findings  at  length  before 
discussing  in  too  much  detail  the  conclusions  which  are  to  be 
drawn  from  them.  Write  the  facts  as  they  are;  do  not  try  to  fit 
the  evidence  to  preconceived  notions. 

Submitting  the  Preliminary  Report.  The  submitting  of  the 
preliminary  report  will  probably  be  the  occasion  of  the  first  con- 
ference with  the  executives  of  the  company  at  which  matters  may 
advisedly  be  discussed  without  reserve.  The  investigator  will  be  in 
a  position,  even  on  the  strength  of  the  limited  information  now  at 
hand,  to  express  some  fairly  decided  views  as  to  policies  and  plans. 

The  real  function  of  this  conference  is  to  ascertain  whether  the 


114  MARKET  ANALYSIS 

preliminary  report  is  along  the  lines  which  the  company  wishes  to 
investigate,  and  whether  the  program  is  adequate  and  satisfactory. 
If  not,  now  is  the  time  to  make  changes.  There  may  be  some 
suggested  lines  of  attack  already  so  apparent  as  to  their  outcome 
that  it  will  be  deemed  hardly  worth  while  to  carry  them  further, 
while  there  will  perhaps  be  other  lines  which  have  not  been  ade- 
quately planned  for. 


CHAPTER  VIII 
THE  PRODUCT  TO  BE  MARKETED 

Outline 

What  is  the  product? 

(a)  Is  it  merchandise  for  manufacture? 

(b)  Is  it  merchandise  for  equipment? 

(c)  Is  it  merchandise  for  individual  or  household  consumption? 

(1)  UtiUty  goods? 

(2)  Style  goods? 

(3)  Combination  of  the  two? 

(d)  Is  it  an  intangible  product,  a  service,  an  amusement,  etc.? 

What  are  the  general  characteristics  of  the  product? 
(a)  Its  physical  properties. 

(1)  Size. 

(2)  Shape. 

(3)  Color. 

(4)  Appearance. 

(5)  Weight. 

(6)  Strength. 

(7)  Hardness. 

(8)  Elasticity. 

(9)  Particular  qualities  or  exclusive  features. 

What  are  the  company's  product  policies? 

(a)  How  many  lines  and  sizes  should  the  company  manufacture? 
(5)  How  many  grades,  styles,  or  types? 

(c)  Does  the  company  manufacture  related  or  unrelated  products? 

(d)  What  are  the  most  popular  lines?   Why? 

(e)  How  much  inventory  is  carried? 
(/)    What  is  done  with  by-products? 

What  is  the  nature  of  the  product? 

(a)  What  is  its  economic  reason  for  existence? 
(1)  Is  it  a  necessity  because  it  is 
(a)  A  new  product? 

(6)  An  improvement  over  products  already  in  use? 
(c)  Cheaper? 

(1)  Because  of  improved  methods  of  manufacture? 

(2)  Because  of  proximity  to  sources  of  raw  materials? 

115 


116  MARKET  ANALYSIS 

(d)  A  substitute  because  of  shortage  of  supply  of  some  other 
product? 

(2)  A  luxury. 

(a)  What  degree  of  luxurj"  demand  is  present? 
(6)  Is  the  product  dependent  for  its  success  on 

(1)  Style? 

(2)  Price? 

(3)  Rarity? 

(4)  Novelty? 

(5)  Publicity? 

(a)  National  advertising. 
(6)  Trade  marks,  etc. 

Who  buys  the  product? 

(o)  Is  it  a  man,  buying  at  the  most  convenient  place,  by  impulse  or  by 

brand? 
(b)  Is  it  a  woman? 

(1)  Convenience  goods. 

(2)  Shopping  lines. 

What  is  the  history  of  the  product? 

(a)  When  was  it  originated? 

(b)  What  changes  have  taken  place? 

(c)  How  has  demand  for  this  product  increased? 

(d)  ^Miat  is  the  future  of  the  product  likely  to  be? 

(e)  How  has  production  of  the  product  increased? 

What  is  the  patent  situation  affecting  the  company? 

(a)  Is  the  patent 

(1)  On  the  product  itself? 

(2)  On  the  process,  or  machinery  of  manufacture? 

(b)  What  are  the  competitive  patents?   How  long  have  they  to  run? 

(c)  Are  there  any  infringements  on  other  patents? 

(d)  WTiat  are  patent  possibiUties? 

How  great  is  the  danger  of  being  superseded  by 

(a)  A  physical  or  technical  change  in  the  product? 

(b)  Improved  methods  of  manufacture? 

(c)  Both  change  in  product  and  methods  of  manufacture? 

What  are  some  possible  reasons  for  being  superseded? 

(a)  Are  there  substitutes  for  the  product  existing  and  making  headway? 
(6)  Is  legislation  preventing  progress? 

(c)  Is  there  a  probabihty  of  some  revolutionary  invention  superseding 

the  product? 

(d)  Are  new  sources  of  supply  being  found  in  large  quantities? 


THE  PRODUCT  TO  BE  MARKETED  117 

Wliat  is  the  importance  of  the  package  in  marketing  the  product? 

(a)  What  is  the  relative  value  of  bulk  and  packaged  goods? 

(1)  Will  packaging  remove  product  from  staple  to  luxury  class? 
(6)  In  how  large  quantities  should  the  product  be  packed? 
(1)  What  determines  the  size  of  units? 
(a)  Is  it  price? 
(5)  Is  it  perishability? 

(c)  Is  it  custom? 

(d)  Is  it  convenience? 

(c)  How  does  the  shape  of  the  product  affect  packaging? 

(1)  Fragihty  of  the  product. 

(2)  Fit  the  pocket. 

(3)  Novelty  of  appeal. 

(d)  Are  contents  standardized? 

(e)  For  how  long  a  period  is  the  carton  used? 

(1)  Is  it  returnable? 

(2)  Is  it  destroyed  immediately? 

(3)  Is  it  used  as  container  for  product  in  use? 

(4)  Is  it  kept  indefinitely  and  used  over  and  over  again? 
if)   What  is  the  appeal  of  the  package? 

(1)  Luxury — display  value. 

(2)  Necessity — utility. 

(g)  How  does  what  is  written  on  the  package  affect  the  problem? 

(1)  Should  instructions  be  printed  on  outside  or  enclosed? 

(2)  What  should  character  of  publicity  be  on  package? 
(h)  Of  what  materials  should  the  carton  be  made? 

(i)    How  are  the  cartons  filled? 

(j)  How  does  cost  of  cartons  affect  product? 


CHAPTER  VIII 
THE  PRODUCT  TO  BE  MARKETED 

The  best  known  factor  in  any  market  investigation  will  prove 
to  be  the  product  itself.  The  surveyor  should  find  available  more 
definite  and  tangible  information  about  what  the  company  makes 
than  about  any  other  aspect  of  his  task.  The  personal  element,  so 
often  a  comphcating  factor,  is  at  a  minimum.  iMost  important  of 
aU,  by  attacking  the  product  first,  the  surveyor  is  following  out  a 
safe  principle,  that  of  proceeding  from  the  particular  to  the  gen- 
eral, from  the  heart  of  the  question  outward.  He  will  find  this 
exceedingly  helpful  in  keeping  the  investigation  within  proper 
bounds,  and  he  will  be  less  likely  to  go  astray. 

The  product  is  a  determining  factor  in  everji:hing  that  follows. 
It  should  be  studied  prior  to  the  market  because  a  thorough  under- 
standing of  it  is  necessary  before  ascertaining  the  market  to  which 
it  wUl  appeal.  It  should  be  studied  before  the  company,  because 
the  company  is  secondary  to  the  product,  and,  in  fact,  built  around 
it.  Production,  purchasing,  selling — each  of  these  departments 
exists,  and  exists  in  the  form  which  it  has  taken,  solely  because  it 
serves  a  certain  function  in  turning  out  the  product.  For  this 
reason,  any  change  in  the  product  means,  or  should  mean,  a 
corresponding  change  in  the  company  itself,  and  if  this  change 
fails  to  take  place,  it  is  an  indication  that  the  organization  is  not 
functioning  property. 

Definition  of  Product.  What  do  we  mean  by  the  product?  For 
purposes  of  market  anah'sis,  a  product  is  any  thing  or  commodity, 
tangible  or  intangible,  that  a  company  or  individual  doing  busi- 
ness for  profit  offers  for  sale.  Since  the  whole  method  of  treat- 
ment varies  with  the  nature  of  the  product,  it  is  advisable  to  make 
some  sort  of  general  classification.  For  instance,  most  products 
wiU  be  tangible,  either  raw  material,  machinery,  or  perhaps 
one  of  the  innumerable  articles  manufactured  for  individual 
consumption. 

118 


THE  PRODUCT  TO  BE  MARKETED  119 

But,  in  the  proper  sense,  a  product  need  not  be  material. 
An  engineering  concern  sells  services,  a  theatre  or  moving  picture 
house  sells  entertainment,  wliile  a  lawyer  sells  legal  advice.  The 
banker  sells  financial  security.  All  of  these  products  are  none  the 
less  merchantable  for  their  lack  of  physical  form.  They  have  very 
definite  and  tangible  markets,  subject  to  the  same  laws  that 
govern  other  marketable  commodities.  Even  labor  has  its 
product  in  the  shape  of  manual  work  performed  for  money. 

Although  market  analysis  in  the  past  has  been  mainly  con- 
cerned with  the  treatment  of  material  goods,  it  should  not  be 
forgotten  that  there  is  no  company  or  individual  in  business  that 
has  not  a  product,  and  further,  that  the  market  survey  is  appHca- 
ble  to  the  field  of  intangible  products  as  well  as  to  that  of  tan- 
gible ones,  and  as  much  profit  may  legitimately  be  expected  from 
its  application. 

Classification  of  Products.  Products  have  been  classified  in 
various  ways  by  economists,  but  the  best  plan  for  the  surveyor 
to  follow  seems  to  be  one  making  the  division  according  to  the 
market.  In  this  way  a  certain  uniformity  may  be  obtained. 
Products  destined  for  the  same  or  similar  markets  are  more 
hkely  to  have  similar  systems  of  distribution  and  common  sales 
problems.  Although  every  product  is  different,  there  are  certain 
points  of  resemblance. 

P.  T.  Cherington,  in  his  "  Elements  of  Marketing,"  divides 
commodities  according  to  the  nature  of  the  final  sale.  He  makes 
three  classifications:  First,  the  merchandise  for  manufacture; 
second,  the  merchandise  for  equipment,  and  third,  the  mer- 
chandise for  household  or  individual  consumption.  To  this  may 
be  added  a  fourth  classification  comprising  the  intangible  products 
for  which  money  is  paid — services,  advice,  medical  treatment, 
amusement,  etc. 

It  is  evident  at  first  glance  that  the  method  of  treatment 
for  these  several  classes  of  commodities  will  be  different.  First 
and  foremost,  the  market  will  be  different,  then  the  distributing 
system  will  be  different,  also  the  sales  methods  and  appeal.  In 
the  following  few  pages,  an  attempt  is  made  to  show  the  particular 
problems  which  demand  special  consideration  from  the  investi- 
gator in  attacking  the  several  classifications. 

(1)  Merchandise  for  Manufacture.     The  outstanding  feature 


120  MARKET  ANALYSIS 

of  raw  materials  is  that  their  characteristics  are  already  formed 
and  cannot  be  altered.  This  is  true  of  mineral  ores  and  silk 
cocoons  as  well  as  wheat,  hides,  and  timber. 

In  most  cases  the  market  is  fairly  well  defined.  The  con- 
sumers of  raw  materials  generally  buy  direct.  Moreover,  the 
surveyor  will  be  apt  to  find  that  it  is  mainly  a  question  of  meeting 
price  competition  and  grading  the  product. 

Cost  of  transportation  is  likely  to  be  a  large  factor  with 
unworked  materials.  In  the  steel  industry,  for  instance,  either 
the  coal  had  to  be  brought  to  Minnesota,  or  the  ore  to  Pennsyl- 
vania. The  latter  alternative  was  adopted.  On  account  of 
transportation  cost,  iron  is  smelted  not  near  the  iron  mines  but 
near  the  coal  mines. 

The  surA'eyor  should  consider  in  his  own  problem  whether  in 
the  costs  of  raw  materials  transportation  charges  are  not  highly 
important,  since  this  is  usually  one  of  the  outstanding  features 
of  goods  coming  under  this  heading. 

(2)  Merchandise  for  Equi-pment.  The  distinctive  feature  of 
the  equipment  class  of  products  is  that,  after  being  sold,  articles 
of  this  nature  are  not  consumed  in  the  sense  that  raw  materials 
are  consumed,  but  still  remain  in  use  as  part  of  the  productive 
machinery.  Equipment  is  seldom  sold  to  the  man  whom  we 
picture  as  the  "  Ultimate  Consumer."  It  is  sold  rather  to 
another  manufacturer,  who,  by  its  aid,  turns  out  another  product 
or  products. 

At  first  sight,  the  machinery  manufacturer  has  a  simpler 
marketing  problem  than  the  firm  with  a  country-wide  distribu- 
tion of  some  staple  commodity,  such  as  packaged  goods.  It 
is  not  a  difficult  thing  for  him  to  obtain  a  list  of  all  possible  users 
of  his  product,  and  to  get  a  veiy  definite  idea  of  their  requirements. 

Yet  the  surveyor  must  remember  that,  in  whatever  classifica- 
tion his  product  falls,  in  the  final  analysis,  demand  will  be  deter- 
mined by  the  ultimate  consmner.  A  spindle  in  a  silk  mill  is 
apparently  a  most  utihtarian  article,  but  its  sale  in  the  long 
run  depends  upon  demand  for  what  is  practically  a  luxury. 
That  is,  the  spindle  demand  must  be  traced  back  to  the  demand 
for  silk  goods. 

(3)  Merchandise  for  Individual  or  Household  Consumption. 
Many  articles  for  which  market  analyses  are  made  wiU  be  found 


THE  PRODUCT  TO  BE  MARKETED  121 

in  the  class  of  materials  manufactured  for  individual  or  household 
consumption,  the  style  and  supply  of  which  are  governed  by 
pubhc  demand.  In  the  preceding  two  classes  of  products,  the 
market  was  limited  and  fairly  well  determined.  In  this  class 
the  appeal  is  hkely  to  be  much  broader. 

The  surveyor  may  find  it  convenient  to  follow  out  the  time- 
honored  division  of  this  class  of  merchandise  into  utility  goods, 
style  goods,  and  those  combining  the  two. 

A.  Utility  goods  ordinarily  are  bought  on  their  merits.  The 
purchaser  pays  little  heed  to  appearance,  the  decisive  factor 
being  serviceabihty.  The  price  of  utility  articles  is  usually  low 
compared  with  similar  articles  combining  a  style  appeal.  Scrub- 
bing powders,  salt,  matches,  and  laundry  soap  are  utility  articles. 
The  Ford  automobile  is  another  example,  more  than  holding  its 
own  against  the  rest  of  the  field  because  of  its  low  price  and  the 
large  amount  of  service  it  gives  in  return  for  the  initial  outlay. 

The  investigator  will  notice  a  tendency  to  concentration  in 
utihty  lines.  Theoretically,  the  company  which  standardizes 
its  product  to  the  highest  possible  degree,  sacrificing  everything 
attractive  for  the  sake  of  utility,  would  be  preeminent  in  that 
field.  Actually,  no  company  obtains  an  absolute  monopoly. 
Aside  from  purely  physical  obstacles,  there  is  always  at  least 
a  trace  of  public  taste  present. 

The  Diamond  Match  Company  virtually  leads  the  match 
industry  in  this  country.  In  the  thread  field,  there  are  several 
large  companies.  The  same  is  true  of  the  typewriter  industry. 
In  the  case  of  salt,  essentially  a  utility  article,  the  price  is  so  low 
and  the  weight  so  great,  that  problems  of  transportation  tend 
towards  decentralization  and  local  supply. 

In  the  utility  field,  the  surveyor  will  find  that  the  inherent 
character  of  the  product  will  go  far  to  determine  its  success.  If 
some  other  company  puts  out  a  better  product,  it  is  a  question 
of  equalling  the  quality  or  discounting  it  by  a  lower  price. 

B.  Style  goods  are  sold  to  suit  the  individual  preference. 
The  demand  cannot  be  expected  to  prove  so  stable  as  in  utility 
goods  and,  to  offset  the  larger  degree  of  risk,  there  is  a  greater 
percentage  of  profit.  Women's  clothing,  jewelry,  high-grade 
furniture,  pictures,  and  millinery  are  all  style  articles.  Whereas 
the  marketing  of  utility  goods  is  so  largely  a  matter  of  meeting 


122  MARKET  ANALYSIS 

price  competition,  in  style  lines  people  not  only  buy  quality,  but 
also  that  intangible  factor,  which,  when  added  to  the  product, 
makes  it  appeal  more  to  the  consimier  than  other  products  which 
may  be  equally  useful  and  cflicicnt. 

The  surveyor  should  expect  to  find  keen  competition  in  style 
lines.  But,  since  there  is  always  a  chance  to  market  something 
different  from  what  everyone  else  is  selhng,  there  arc  almost 
always  opportunities  for  small  companies.  In  studying  a  style 
hne,  the  question  of  instabihty  is  very  important.  The  thing 
that  is  stylish  one  season  is  perhaps  out  of  style  the  next. 

The  surveyor  should  find  little  difficulty  in  deciding  whether 
his  product  falls  in  one  or  the  other  of  the  above  two  classes,  but, 
for  reasons  set  forth,  he  should  know  where  it  does  stand,  and  why. 

C.  Few  products  are  either  wholly  utility  or  wholly  style. 
Most  manufacturers  try  to  combine  the  two.  Generally  speak- 
ing, the  more  style,  the  higher-priced  the  article  will  be.  For 
this  reason,  the  surveyor  should  attempt  to  determine  as  quan- 
titatively as  possible  the  degree  of  style  present.  This  not  only 
has  an  important  bearing  on  the  price,  but  also  on  the  market 
and  distributive  methods. 

As  in  the  case  with  almost  every  arbitrary  classification,  this 
attempt  to  classify  products  will  have  its  disadvantages.  All 
products  are  interrelated.  The  raw  material  becomes  equipment, 
and  turns  out  finished  goods.  Figure  22  shows  the  multitude  of 
material  products  which  enter  into  the  modem  automobile. 
No  complete  isolation  of  a  product  is  possible.  It  must  be 
treated  in  connection  with  the  whole  field.  In  studying  an  auto- 
mobile, if  the  survey  were  carried  out  logically,  it  would  be 
necessary  to  investigate  aU  the  other  products  which  went  into 
the  make-up  of  the  completed  machine. 

(4.)  Intangible  Products.  It  remains  to  speak  of  intangible 
products.  There  is  no  inherent  reason  why  an  investigator  cannot 
make  a  survey  for  a  theatre  as  weU  as  for  an  automobile  or  a  feather 
duster.  But  so  far,  little  market  analysis  work  has  been  done 
along  this  line.  The  city  of  San  Diego,  California,  has  used 
advertising  as  a  means  of  marketing  its  hospitality.  Several 
churches  have  advertised.  There  is  one  instance  of  a  public 
library  which  increased  its  circulation  through  advertising.  But 
there  has  been  too  little  systematic  work  along  this  line. 


THE  PRODUCT  TO  BE  MARKETED 


123 


In  many  professions,  there  is  the  question  of  etiquette,  which 
frowns  upon  any  undue  personal  pubhcity.     This  chiefly  affects 


the  lawyer,  the  doctor,  the  architect,  and  so  forth.  But  the 
barriers  seem  to  be  gradually  breaking  down.  Banks  arc  now 
advertising  for  depositors,  a  thing  unheard  of  ten  years  ago. 


124  MARKET  ANALYSIS 

In  whatever  categoiy  the  product  may  fall,  the  surveyor 
should  remember  that  classifying  will  be  of  help  only  as  he  can 
use  facts  known  to  apply  to  that  class  of  products.  Thus,  in 
the  case  of  a  raw  material,  he  must  investigate  especially  trans- 
portation charges;  in  the  equipment,  he  must  ascertain  the 
number  of  manufacturers  using  this  equipment  and  also  the 
supply  and  demand  of  the  raw  materials  which  the  equipment 
utilizes.  As  regards  the  products  for  ultimate  consumption, 
it  is  proper  to  investigate  both  sources  and  supplies  of  raw  mate- 
rials, and  the  methods  by  which  the  product  is  made. 

General  Characteristics  of  the  Product.  When  sizing  up 
a  product,  the  surveyor  will  do  well  to  compare  it  with  an  ideal 
product,  as  well  as  with  other  similar  articles.  For  example, 
universal  joints  for  automobiles  are  being  made  of  fabric  or  cord 
discs  instead  of  metal  parts  in  rapidly  increasing  numbers. 
Theoretically,  the  fabric  disc  drive  is  compact,  light,  durable, 
requires  no  attention,  and  is  easy  to  replace.  Yet  when  the  actual 
results  of  tests  are  compared  with  the  ideal  product,  it  is  easy  to 
see  discrepancies  between  theoiy  and  practice.  Figure  23  shows 
a  tabulation  of  the  ideal  and  actual  qualities  of  fabric  universal 
joints,  as  prepared  for  a  recent  survey  of  the  subject. 

What  effect  will  the  physical  characteristics  of  the  company's 
product — its  size,  shape,  design,  finish,  weight,  etc.,  have  on  the 
market  problem?  What  size  should  a  piano  be  to  be  suitable  for 
the  average  modem  drawing  room?  WTiat  is  the  best  shape  for  a 
medicine  bottle?  How  much  should  a  spading  fork  weigh  to  give 
strength  without  tiring  the  user?  Each  specific  product  will 
have  special  problems  of  this  nature. 

In  addition  to  physical,  the  product  will  usually  have  chemical 
and  other  properties  which  should  be  studied.  What  chemical 
change  does  the  climate  or  weather  make?  What  improvements 
are  necessary,  etc.?  It  is  not  always  possible  to  foretell  with 
accuracy  which  one  of  these  facts  is  going  to  prove  important. 

An  investigation  of  the  product  frequently  leads  to  some  slight 
modifications.  Any  process  of  manufacture,  once  established, 
is  apt  to  run  along  the  same  lines  until  an  investigation  reveals 
this  necessity.  As  it  is  possible  to  discover  opportunities  for 
improvement  in  almost  anything,  particiilarly  when  the  investi- 
gating is  done  in  a  scientific  fashion,  the  surveyor  will  be  almost 


THE  PRODUCT  TO  BE  MARKETED 


125 


REQUIREMENTS   OF   IDEAL    DISC    DRIVE 
Points  upon  Which  to  Judge  Designs 


Ideal  Characteristics 


Performance 

1.  Ability  to  transmit  torque. 

2.  Ability    to    operate     through 

angle. 

3.  Mechanical  efficiency. 

4.  Freedom   from   vibration   and 

whip. 

5.  Elimination  of  shocks. 

6.  Safety — no  danger  of  sudden 

failure. 

7.  Quietness. 

Physical  Characteristics 

1.  Compactness. 

2.  Lightness. 


3.  Sturdy    and    mechanical    ap- 
pearance. 
Life 

1.  Durability  —  freedom     from 

deterioration. 

2.  Resistance  against  wear. 

3.  Reliability. 


Seroice 

1.  Freedom    from    attention    re- 

quired. 

2.  Ease  of  making  replacements. 

Loir  Cost 

1.  Materials. 

2.  Manufacture. 


3.  Upkeep. 


Limitations  upon  Ideal 


Ample — but  cord  disc  probably  stronger  than  fabric. 
Limited  to  6°  or  7° — Climax   claims    12° — inferior  to 

metal  joint — greatest  limitation  of  this  type. 
High — some  power  lost  through  stiffness  of  discs. 
Inferior  to  metal — difficult  to  obtain  without  careful 

balancing  or  use  of  centering  device. 
Superior  to  metal — said  to  increase  life  of  other  parts 

of  car,  such  as  engine,  rear  axle,  and  tires. 
Equivalent  to  metal,  or  better. 

Superior  to  metal — not  only  silent  in  itself,  but  said 
to  make  other  parts  quieter. 

More  cumbersome  than  metal — interferes  with  clear- 
ances— greater  compactness  very  desirable. 

Lighter  than  metal — lightness  an  increasingly  impor- 
tant point  as  engineers  strive  to  reduce  unsprung 
weight.     Lightness  of  propeller  tube  important. 

Inferior  to  metal,  partly  because  of  novelty. 


Probably  inferior  to  metal — test  data  not  available. 

Lower  than  metal. 

Superior  to  metal — not  liable  to  sudden  failure — gives 

warning   of   failure — "  will   run     10,000   miles   after 

worn  out  " — 

Greatly  superior  to  metal — no  lubrication — may  need 

occasional  tightening  of  bolts. 
Superior  to  metal — only  one  moving  part. 


Cheaper    than    metal — few   parts,   forgings    simple — 

discs  most  expensive  part. 
Cheaper  than  metal — -no  bearing  surfaces — no  difficult 

operations — no  great  accuracy  required — no  splines 

or  slip  joints — assembly  cost  low. 
Cheaper    than   metal — service  station's   problem  sim- 

plifiod,   since   few  parts  are  used,   and  only  one  of 

tliciii  is  likely  to  fail — replacements  cheap. 


Fig.  23. — Chart  Comparing  Ideal  with  Actual  Characteristics  of  a  Product. 


126  MARKET  ANALYSIS 

certain  to  find  some.  Nearly  cvcrj'one  in  the  company  will  have 
vague  ideas  as  to  what  changes  ought  to  be  made.  Customers, 
perhaps,  will  have  fairly  definite  recommendations  to  make. 
It  is  for  the  market  surveyor  to  decide,  on  the  basis  of  facts, 
the  modifications  which  should  be  most  helpful. 

It  is  voiy  important  for  the  surveyor  at  the  start  of  his  investi- 
gation to  define  carefully  the  characteristics,  both  general  and 
particular,  of  the  product.  This  definition  will  be  invaluable 
throughout  his  work.  The  very  fact  of  having  to  define  it  on 
paper  will  go  far  to  define  it  in  his  mind,  and  without  a  thorough 
comprehension  of  the  product  in  its  every  aspect,  no  accurate 
surv^ey  is  possible.  Furthermore,  such  definitions  will  be  invalu- 
able when  he  comes  to  discuss  the  matter  with  authorities.  Even 
the  executives  of  the  company  will  doubtless  welcome  work- 
manlike exposition  of  the  characteristics  of  their  product,  a 
thing  which  very  likely  they  may  never  have  had  before.  Inci- 
dentally, such  a  description  may  be  a  tactful  way  on  the  part  of 
the  surveyor  to  intimate  necessary  changes.  Thus,  although 
he  might  hesitate  to  recommend  modifications  directly,  the 
necessity  for  alterations  may  stand  out  as  perfectly  obvious 
once  a  truthful  definition  is  represented. 

The  Number  of  Products  Manufactured.  The  investigator 
will  rarely  come  in  contact  with  a  company  manufacturing  but 
a  single  commodity.  Most  of  them  turn  out  a  line  of  products. 
Theoretically,  this  means  that  as  many  market  surveys  must  be 
made  as  there  are  products.  Of  course,  where  the  difference  is 
only  one  of  size,  or  of  some  slight  variation,  practically  one  sur- 
vey will  do  for  all.  A  prominent  leather  company,  whose  main 
line  was  machine  belting,  manufactured  numerous  other  articles 
from  leather,  such  as  straps,  leather  garters,  and  shoe  insoles. 
In  analyzing  its  marketing  problem,  it  was  found  necessary  to 
make  a  separate  survey  for  each  of  the  minor  products,  since 
they  were  sold  through  different  channels,  and  the  method  of 
approach  was  quite  distinct. 

The  same  is  true  of  by-products,  which  can  rarely  be  marketed 
through  the  same  channels  as  the  main  product.  Often  the  small 
company  finds  it  cheaper  to  turn  over  the  by-product  to  a  middle- 
man than  to  attempt  its  distribution  itself.  The  smaller  soap 
companies  find  this  to  be  the  case  with  their  output  of  glycerin. 


THE  PRODUCT  TO  BE  MARKETED  127 

As  a  general  rule,  the  larger  the  company,  the  better  prepared 
it  is  to  take  advantage  of  opportunities  arising  from  the  occur- 
rence of  by-products. 

The  surveyor  may  come  in  contact  with  a  company  having 
to  market  its  product  in  two  entirely  different  markets.  For 
example,  the  maker  of  hand  tire  pumps  sells  to  the  automobile 
manufacturer  and  to  the  car  owner. 

The  automobile  manufacturer,  as  has  been  proved,  buys 
hand  tire  pumps  for  equipment  almost  entirely  on  a  basis  of  price. 
The  consumer  buj^s  for  entirely  different  motives,  such  as  service- 
ability, ease  of  operation,  and  durability.  In  the  first  case,  the 
pump  manufacturer's  market  is  distinctly  limited  to  the  manu- 
facturers of  automobiles,  while  in  the  latter  case  he  has  for  cus- 
tomers the  whole  automobile-owning  public.  Yet  a  survey  of 
the  one  field  would  be  of  little  value  in  determining  the  possi- 
bilities of  the  second. 

Problems  such  as  the  above  occur  in  nearly  every  investiga- 
tion. The  surveyor  will  find  much  divergence  of  opinion,  and 
his  judgment  should  rather  be  guided  by  the  facts  and  their 
relation  to  the  consensus  of  opinion.  What  he  wants  to  know 
is  if  the  company  is  justified,  taking  eve ly thing  into  consideration, 
in  manufacturing  its  present  lines.  Are  there  too  many,  are  there 
too  few,  or  does  the  present  program  appear  best? 

Styles  and  Tjrpes.  How  many  styles  and  types  are  necessary? 
The  surveyor  will  often  find  this  question  up  for  decision.  He 
is  usually  faced  with  two  decided  points  of  view,  that  of  the  sales 
department  and  that  of  the  production  department. 

(1)  The  Sales  Deyartment.  From  the  salesman's  angle,  the 
most  important  point  is  to  sell  the  customer  what  he  wants  to 
buy.  That  is,  the  larger  line  of  goods  he  has,  the  better  fitted 
he  is  to  make  sales.  He  prefers  to  work  along  the  line  of  least 
resistance,  rather  than  employ  arguments  to  convince  the  customer 
that  another  size  or  style  can  be  used  to  the  same  advan- 
tage. 

This  policy  often  leads  to  a  multiplication  of  sizes  and  styles 
beyond  all  measure  of  actual  requirement.  This  is  seen  every 
day  in  practice.  For  example,  one  textile  soap  company  was 
found  under  investigation  to  be  manufacturing  twenty-seven 
different  varieties  of  soap  while  it  was  shown  that  seven  would 


128  MARKET  ANALYSIS 

serve  the  purpose  practically  as  well,  while  doing  away  with 
much  overhead  expense  and  adding  to  production  efficiency. 

(2)  The  Production  Departmeiit.  It  is  generally  agreed  as  a 
matter  of  theoiy  that  efficiency  comes  with  quantity  production. 
In  a  medium-sized  manufacturing  estabhshment,  it  is  not  possible 
to  combine  operating  efficiency  with  a  large  number  of  sizes  and 
lines.  It  makes  too  much  confusion  when  it  is  not  convenient 
to  have  a  department  for  each  particular  line.  It  is  not  unusual 
to  find  the  \dews  of  the  production  department  on  the  diversity 
of  the  product  at  loggerheads  with  those  of  the  sales  department. 

Of  course,  the  above  statements  do  not  always  hold  true. 
There  are  some  lines  of  business,  the  prosperity  of  which  depends 
on  an  ability  to  turn  out  diversified  products.  The  greeting  card 
industry  is  a  good  example,  where  novelty  and  differentiation  are 
absolute  prerequisites  to  success.  Jobbing  businesses,  such  as 
machine  shops  and  cabinet  makers,  usually  depend  for  their  success 
on  their  abihty  to  fulfil  work  with  divergent  requirements. 

But,  in  general,  the  surv^eyor  will  find  that  styles  and  types 
should  be  limited  to  a  certain  number,  and  that  this  number  is 
not  necessarily  fixed,  but  that  it  may  vaiy  from  time  to  time  in 
accordance  with  demand  and  conditions.  He  ought  to  judge 
this  matter,  not  from  the  opinions  of  anyone  at  the  plant,  but 
rather  on  the  basis  of  the  facts  as  imcovered  by  the  investi- 
gation. 

Use  and  Limitation  on  Use.  In  general  the  use  to  which  the 
product  is  put  determines  the  motive  for  its  purchase.  There 
is  some  definite  need  or  desire  on  the  part  of  the  purchaser  which 
makes  him  want  this  article.  In  marketing  to  the  general  public, 
the  idea  is  current  that  men  and  women  purchase  from  different 
motives.  A  man,  it  is  said,  does  not  ordinarily  shop.  He  buys 
at  the  most  convenient  place,  by  impulse,  by  habit,  or  by  brand. 
A  woman  shops  for  some  things  and  buys  others  where  most 
available.  This  leads  to  another  classification  of  products  which 
are  marketed  to  women,  namely,  convenience  goods  and  shop- 
ping lines.  If  the  surveyor's  product  is  intended  for  feminine 
consumption,  he  should  consider  these  carefully: 

(1)  Convenience  Goods.  These  include  such  things  as  notions, 
thread,  and  other  necessities  into  the  purchase  of  which  the 
question    of  style    does  not    particularly  enter,  in  other  words, 


THE  PRODUCT  TO  BE  MARKETED  12^ 

articles  in  the  purchase  of  which  there  is  no  particular  necessity 
for  comparing  values. 

(2)  Shopping  Lines.  For  clothes,  dry-goods  such  as  sillcs, 
cottons,  woolens,  etc.,  and  all  articles  where  it  is  a  question  of 
style,  a  woman  goes  to  a  department  store  or  a  specialty  shop. 
Usually  she  is  not  satisfied  with  one.  She  is  said  by  some  to  try 
three  before  making  the  final  purchase.  This  has  tended  to  hmit 
the  number  of  department  stores,  even  in  the  large  cities. 

It  is  said  people  do  not  buy  nearly  so  intelligently  as  they 
once  did.  In  table  linen,  the  guiding  factors  in  purchasing  at 
present  are  pattern  and  price.  In  old  days  it  was  necessary  to 
keep  a  magnifying  glass  available  so  that  a  woman  might  count 
the  threads  to  the  inch,  or  the  salesman  could  count  them  for  her 
while  she  considered  the  purchase. 

One  reason  which  makes  it  important  for  the  surveyor  to 
classify  his  product  according  to  convenience  goods  or  shopping 
lines  is  that  large  merchants,  usually  department  stores,  choose 
to  buy  direct  from  manufacturers.  For  this  reason,  shopping 
lines  are  ordinarily  marketed  in  this  way,  whereas  convenience 
goods  are  more  often  sold  through  jobbers.  Such  an  important 
variation  in  methods  of  distribution  should  not  escape  the  sur- 
veyor. 

Necessities  and  Luxuries.  All  goods  may  be  roughly  divided 
into  necessities  and  luxuries,  although  there  is  actually  no  sharp 
dividing  line  between  them.  The  classification  depends  on  the 
personal  point  of  view,  the  standard  of  living  of  the  individual 
concerned,  the  climate,  etc.  The  best  way  for  the  market  sur- 
veyor to  get  a  line  on  the  essential  nature  of  the  product  is  to 
analyze  the  motives  for  buying.  The  market  has  a  very  definite 
bearing  upon  this.  In  fact,  it  is  inseparably  connected  with  it. 
Luxuries,  for  example,  will  have  a  market  more  subject  to  fluctu- 
ations than  necessities. 

The  surveyor  will  note  that  civilization  tends,  as  it  becomes 
more  complicated,  to  widen  the  scope  of  necessities.  Articles 
continually  are  graduating  from  the  class  of  luxuries  into  that  of 
necessities.  The  automobile  started  out  as  the  highest  type  of 
luxury  and  has  now  become  a  necessity  for  many.  Many  things 
we  now  consider  necessities  were  not  known,  even  to  our 
fathers,    in    their    youth.     The    telephone,    the    telegraph,    the 


130  MARKET  ANALYSIS 

electric  light,  and  other  innumerable  examples  show  how  fast 
the  necessity  demands  of  the  human  race  are  increasing. 

It  is  often  the  aim  of  manufacturers  to  transfer  their  product 
to  the  necessity  from  the  luxmy  class.  The  reasons  for  this  are 
obvious.  The  demand  for  luxuries  is  unstable.  It  varies  not 
onty  with  the  season  but  especially  with  hard  and  good  times. 
Though  the  profit  is  large  one  year,  it  is  low  the  next.  If  manu- 
facturers can  put  their  articles  into  the  necessity  class  or  the 
semi-necessity  class  (for  instance,  silk  hosiery)  they  are  assured  of  a 
stable  demand.  Many  articles  are  in  the  transition  stage  at 
this  moment,  such  as  electric  apparatus  for  the  household, 
electric  irons,  washing  machines  and  vacuum  cleaners,  the  tractor, 
electric  lighting,  etc. 

The  surveyor  should  try  to  ascertain  the  degree  of  luxury 
demand  present  in  the  sales  volume  of  any  product.  By  analyz- 
ing the  use  to  which  the  product  is  put  he  can  get  some  idea  of 
it.  The  use  will  largely  determine  the  classification:  not  only 
the  extent  of  the  use,  but  the  character  of  the  use,  whether  it  is 
consumed  by  rich  and  poor  alike,  or  by  the  rich  alone.  What 
special  convenience  does  it  give  by  its  use  without  which  the  pur- 
chaser would  feel  some  deprivation?  Would  there  be  a  void  if  it 
were  suddenly  removed?  Is  its  use  increasing  faster  than  the  rate 
of  growth  of  population? 

One  way  of  determining  the  use  is  to  analyze  the  economic 
reasons  for  the  existence  of  this  article. 

(1)  Is  it  a  new  product  filling  a  hitherto  unsatisfied  want? 
Not  long  ago  cuticle  solvents,  soap  dyes  and  deodorants  were 
miknown.  To-day  great  successes  are  being  made  in  these  lines. 
Is  it  an  old  product  filling  a  new  use?  For  instance,  roofing  paper 
is  used  in  Hawaii  for  preventing  weeds  in  sugar  fields.  Every 
new  invention  that  is  worth  while  may  prove  to  have  great 
opportunities. 

(2)  Is  the  product  a  worth  while  improvement  on  one  already 
in  use?  If  it  really  is  an  improvement,  there  can  be  Uttle  question 
of  its  ultimate  adoption.  It  did  not  take  many  years  for  the 
timgsten  filament  to  supersede  the  carbon  filament  in  the  electric 
lamp. 

(3)  Can  the  product  be  made  more  cheaply?  Artificial  sap- 
phires and  rubies  can  be  produced  much  more  economically  than 


THE  PRODUCT  TO  BE  MARKETED  131 

the  stone  occurring  naturally,  and  have  therefore  a  much  wider 
market,  owing  to  the  reduced  price  range.  The  same  is  true  of 
many  synthetic  substances. 

(4)  Is  there  a  shortage  in  supply?  Any  product  which  exists 
solely  because  of  such  a  condition  in  that  line  is  doomed  to  rapid 
extinction.  The  war  brought  back  into  life  many  decrepit  and 
defunct  products  which  swiftly  passed  out  of  use  again  when  the 
need  was  over.  For  instance,  the  wooden  sailing  ship  had  a 
brief  rejuvenation,  only  to  be  discarded  when  there  was  again 
a  sufficiency  of  steel  ships. 

Once  the  surveyor  has  determined  what  there  is  about  the 
product  which  leads  people  to  buy  it,  he  has  performed  an 
important  part  of  the  task  of  classification.  He  knows  whether 
it  is  necessity  or  liLxuiy  demand  that  must  be  met,  and  he  knows 
whether  it  meets  demand  as  a  new  product,  an  improved  product, 
a  cheaper  product,  or  a  temporary  substitute.  Without  this 
knowledge,  it  would  be  much  more  difficult  for  him  to  obtain  any 
accurate  information  regarding  the  product.  He  may  find  that 
the  reason  for  trouble  in  the  company's  selling  plans  is  due  to  a 
misunderstanding  of  the  fundamental  nature  of  the  product  and 
the  reason  for  its  economic  existence. 

The  History  of  the  Product.  History,  like  everything  else, 
must  be  analyzed  scientifically.  In  other  words,  it  must  be 
analyzed  quantitatively.  The  only  history  of  which  the  investi- 
gator can  make  practical  application  is  that  which  can  be  expressed 
by  a  curve  or  a  chart.  It  is  well  enough  to  get  the  light  and 
shade  of  the  picture,  the  name  of  the  founder  of  the  company  and 
a  woodcut  of  the  shop  in  which  he  began  operations,  but  these 
matters  are  for  the  antiquarian  rather  than  for  the  surveyor. 

It  is  not  true  that  because  the  past  of  a  product  is  thus  and 
so,  its  future  is  going  to  be  the  same.  This  is  rarely  the  case. 
There  are  few  products  remaining  constantly  in  favor.  The 
product  may  remain  but  the  style  changes.  We  arc  apt  to  take 
the  permanence  of  many  of  our  daily  necessities  for  granted.  Yet 
it  is  only  necessaiy  to  glance  for  a  moment  at  their  past  to  see 
that  most  of  them  have  changed  considerably  in  the  last  hun- 
dred years.  Many  of  them  are  new-comers;  many  are  so  altered 
as  to  be  almost  unrecognizable. 

The  histoiy  of  the  product  will  show  the  surveyor  better  than 


132  MARKET  ANALYSIS 

almost  anything  else  whether  the  demand  is  likely  to  be  stable 
or  unstable.  Some  products  continue  on  an  even  level;  others 
change  about  almost  over-night.  Clothespins  do  not  vary  much 
from  decade  to  decade,  but  millinery  changes  almost  as  caprici- 
ously as  those  who  wear  it. 

For  advertising  and  publicity  purposes  it  is  interesting  to 
know  when  the  product  was  produced  first,  by  whom,  how  and 
why,  whether  it  was  a  scientific  discovery,  how  it  was  accepted 
by  the  public,  instances  of  its  use  and  noteworthy  changes,  but 
the  important  service  which  a  study  of  the  history  gives  is  for 
comparison.  It  shows  the  investigator  how  the  use  of  the  product 
has  increased  from  year  to  year;  it  will  show  him  the  price  changes 
which  have  taken  place;  it  will  show  him  whether  the  product  is 
becoming  more  or  less  of  a  necessity;  it  will  serve  as  a  basis  from 
which  he  can  make  predictions  as  to  the  future  (always  remem- 
bering, however,  that  something  might  happen  which  would  render 
his  predictions  worthless). 

It  is  interesting  sometimes  to  glance  at  the  products  the 
company  made  years  ago,  and  observe  the  improvements,  remem- 
bering that  the  same  number  of  j^ears  in  the  future,  this  product 
doubtless  will  appear  just  as  antiquated. 

In  all  this  historical  and  semi-historical  work,  the  surv^eyor 
must  not  be  led  astray.  He  should  appreciate  it  at  its  true 
worth,  remembering  that  its  primary  function  is  to  illuminate 
the  present  and  not  to  determine  it.  The  same  set  of  conditions 
which  caused  certain  events  to  happen  in  the  past  are  hardly  likely 
to  recur  in  the  future.  The  surveyor  must  interpret  this  historical 
information  in  the  light  of  present  conditions,  which  means  a  very 
sparing  use  of  historical  analog}'. 

Patents.  Patents  serve  two  purposes  in  modern  manufac- 
turing. They  protect  the  product  itself,  or  the  process  by  which 
the  product  is  made. 

(1)  A  basic  patent  protecting  the  product  may  cover  some 
composition  material  or  be  on  the  product  itself,  such  as  a  cash 
register  or  Line-a-Time  device  for  typewriters. 

(2)  There  are  many  commodities  of  essentially  long-standing, 
which  are  not  in  themselves  patentable,  yet  which  are  manufac- 
tured by  patented  processes.  For  example,  a  great  manj^  textiles 
are  now  manufactured  by  automatic  looms,  which  put  in  a  new 


THE  PRODUCT  TO  BE  MARKETED  133 

bobbin  without  the  use  of  a  hand.  These  looms  are  patented. 
The  idea  of  a  loom  is  free  to  everyone,  but  this  particular  loom 
is  prohibited  by  patent. 

On  whatever  grounds  the  company's  patents  rest,  the  investi- 
gator should  find  out  what  the  exact  situation  is,  particularly  as 
regards  the  question  of  infringements.  Is  the  company's  product 
circumscribed  in  development  by  patents  owned  by  other  com- 
panies? Are  any  of  these  about  to  expire,  and  what  effect  would 
such  an  event  have?  There  may  be  nothing  of  importance  to 
uncover  under  this  heading,  but  the  surveyor  should  remember 
that  it  is  not  what  he  does  which  will  render  his  survey  inaccurate, 
but  what  he  leaves  undone. 

The  Danger  of  Being  Superseded.  A  large  proportion  of 
those  for  whom  market  analyses  are  made  prove  to  be  manu- 
facturers; and  it  is  almost  unpossible  to  discover  a  manufac- 
tured product  which  will  not  sooner  or  later  be  superseded.  In 
the  course  of  business  evolution,  the  product  will  be  modified 
and  the  modification  will  supplant  the  prototype. 

Therefore,  if  the  article  under  investigation  is  a  manufactured 
one,  the  surveyor  must  examine  it  carefully  and  see  what  changes 
have  taken  place  in  the  past  and  what  changes  are  now  taking 
place  or  are  likely  to  take  place.  He  will  probably  find  one  of  the 
following : 

(1)  A  physical  or  technical  change  in  the  nature  of  the  article 
itself. 

(2)  Improvement  in  the  method  of  manufacture. 

(3)  Both  change  in  the  product  and  change  in  the  method  of 
manufacture.  The  paper  industry  is  a  good  example  of  the  last 
point.  Originally,  paper  was  made  of  papyrus  and  parchment, 
then  of  rags,  and  finally  of  wood  pulp.  The  paper  of  a  hundred 
years  from  now  may  be  made  of  still  different  materials.  Not 
only,  however,  has  the  material  changed,  but  the  processes  of 
paper  making  as  well. 

Thus,  in  considering  any  product,  the  surveyor  must  examine 
the  possibility  of  some  unforeseen  occurrence  suddenly  or  gradu- 
ally terminating  the  life  of  the  product.  There  are  several 
causes  which  may  })ring  about  this  effect,  the  most  important 
of  which  are  listed  below : 

(1)  Substitutes.     The    surveyor  will    find  that  whenever  the 


134  MARKET  ANALYSIS 

price  of  an  article  becomes  too  high,  either  through  actual  short- 
age or  artificial  manipulation,  substitutes  tend  to  spring  up. 
Whether  these  will  persist  and  become  established  cannot  be  fore- 
told without  a  detailed  market  analysis  of  fundamental  conditions 
underlying  the  industiy'.  The  surveyor  must  determine  whether 
the  substitute  is  better,  cheaper,  more  easily  obtained,  and  what 
constitutes  its  advantages  and  shortcomings. 

Not  many  3'^ears  ago,  cotton  mills  used  indigo  for  dyeing 
denims,  yet  indigoes  now  have  been  entirely  superseded  by 
anihne  dyes.  Another  case  in  point  is  that  of  aluminum  ware, 
which  is  making  steady  encroachments  in  the  kitchen  utensil 
field.  Yet,  although  in  some  lines,  substitutes  have  sprung  up, 
the  original  product  may  retain  a  portion  of  the  field. 

Linen  towels  survive  and  hold  their  own  against  cotton  towels, 
it  has  been  found,  for  several  reasons,  the  most  important  being  the 
popular  prejudice  in  favor  of  linen.  Since  this  is  the  case,  the  sell- 
ing force  naturally  caters  to  this  prejudice.  Clerks  who  work  on  a 
percentage  basis  endeavor  to  sell  the  lines  which  net  them  the 
biggest  commission.  Buyers  also  foster  the  linen  lines  because 
it  means  an  annual  trip  abroad. 

Unhke  revolutionary  inventions,  and  new  sources  of  supply, 
a  substitute  requires  time  in  which  to  effect  a  change.  For  this 
reason,  the  surveyor  will  discover  some  intimation  of  the  impor- 
tance of  substitutes  for  the  product,  and  the  uuminence  of  the 
danger  of  being  superseded. 

(2)  Legislation.  If  the  legislator  wishes  to  make  an  analysis 
of  possible  prohibitory  legislation,  he  must  study  the  political 
horizon.  He  should  bear  in  mind,  however,  that  the  absence 
or  presence  of  a  protective  tariff  often  determines  the  prosperity 
of  an  industry.  In  rare  cases  penal  legislation  may  enter  the 
question.  The  liquor  industrj%  for  example,  was  legislated  out 
of  existence  in  short  order.  The  Food  and  Drugs  Act  has  also 
curtailed  the  sale  of  certain  commodities. 

It  will  be  difl&cult  for  the  surveyor  to  determine  the  effect 
of  revenue  taxation  on  the  product.  In  the  case  of  theatre 
tickets  and  tobacco,  it  has  little  effect.  Taken  as  a  whole,  legis- 
lation will  not  radically  influence  the  marketing  of  the  product. 

(3)  Revolutionary  Invention.  Inventing  a  far  superior  article 
is  one  of  the  quickest  ways  of  superseding  a  product.     To  cite  an 


THE  PRODUCT  TO  BE  MARKETED  133 

example,  among  the  competitive  machinery  for  making  shoes 
some  years  ago  was  a  certain  burnisher.  The  United  Shoe 
Machinery  Co.  perfected  and  put  the  Expedite  machine  on  the 
market.  This  did  the  work  so  much  faster  and  better  that  it 
became  merely  a  question  of  how  soon  the  other  machine  could 
be  discarded. 

It  will  hardly  be  possible  for  the  surveyor  to  be  of  assistance 
in  any  such  case  as  this.  If  any  such  conditions  exist,  it  will 
be  a  question  of  finding  an  article  as  good  as  the  revolutionary 
invention  in  order  that  the  company  may  survive. 

(4)  New  Sources  of  Supply.  Many  articles  have  value  because 
of  their  rarity.  If  the  surveyor  is  investigating  a  substance 
of  this  kind,  he  must  try  to  find  out  as  much  as  he  can  about 
sources  of  supply.  Once  new  sources  of  supply  are  opened  in 
such  quantity  as  to  make  the  article  common,  the  value  of  it  is 
lost.  The  market  is  revolutionized  because  the  purchasing  scope 
is  vastly  enlarged  by  the  reduction  in  price.  For  instance,  if 
there  were  a  commercial  method  discovered  by  which  lower 
forms  of  carbon  could  be  converted  into  diamonds,  then  the  mar- 
ket would  be  entirely  altered.  Similarly,  if  a  process  were  per- 
fected for  extracting  aluminmn  cheaply  from  some  of  the  enor- 
mous supplies  of  kaolin  available,  and  production  were  no  more 
confined  to  cryolite  and  bauxite,  as  it  is  today,  the  entire  metal 
industry  would  be  vitally  influenced. 

As  soon  as  supplies  of  raw  materials  begin  to  become  depleted, 
the  cost  rises,  and  there  is  an  incentive  for  the  invention  and 
production  of  substitutes  on  a  commercial  scale.  As  an  example, 
our  petroleum  resources  are  being  rapidly  exhausted,  as  shown 
graphically  in  Fig.  24.  Therefore,  petroleum,  although  subject 
to  fluctuations  in  price,  on  the  average  will  become  more  costly 
as  rate  of  production  falls  off.  Already  we  have  had  many 
substitutes  offered,  and  in  the  future  this  number  will  increase 
until  a  commercially  possible  substitute  for  gasoline  has  been 
found. 

The  surveyor  should  be  careful  to  point  out  any  tendencies 
existing  that  might  lead  to  a  superseding  of  the  product,  even 
although  the  tendency  has  not  progressed  far.  It  will  be  easier 
for  the  company  to  cope  with  the  situation  at  the  beginning 
than  after  it  has  reached  dangerous  proportions. 


136 


MARKET  ANALYSIS 


THE  PRODUCT  TO  BE  MARKETED  137 

Packaging.  Products  were  originally  packed  to  keep  them 
from  injuiy  and  in  as  good  shape  as  possible  during  shipment. 
Practically  all  articles  have  to  be  packed  at  some  stage  in  the 
distributive  process.  Originally  they  were  marketed  to  the  con- 
sumer in  bulk,  that  is,  the  retailer  measured  out  a  certain  quantity 
of  the  product  which  had  come  to  him  in  kegs,  barrel,  box  or 
bag,  and  gave  it  to  the  consumer.  There  was  little  or  nothing 
to  distinguish  the  identity  of  one  product  over  another. 

The  invention  of  canning  processes  brought  in  the  sealed  con- 
tainer. As  the  product  could  not  be  sampled,  it  was  necessary 
to  show  the  nature  of  the  contents  on  the  outside,  and  therefore 
a  label  with  a  description  of  the  contents  was  prepared.  This 
idea  has  now  become  so  prevalent  that  the  common  way  of  mar- 
keting goods  is  to  package  them,  if  in  any  way  their  size  or  shape 
permits.  Thus  the  display  value  of  the  package  is  of  great 
importance  to  eveiy  manufacturer,  and  it  is  a  point  which  the 
investigator  must  examine  carefully. 

There  is  a  scientific  way  of  selecting  a  carton  and  there  is  an 
unscientific  way.  As  an  example  of  the  former  method.  The 
Beech  Nut  Packing  Company  allowed  the  public  to  select  the 
carton  for  their  brand  of  macaroni.  They  took  the  twenty-two 
designs  submitted  by  artists  and  carefully  registered  the  opinion 
of  consumers  on  the  appropriateness  and  value  of  the  various 
designs,  and  the  relative  value  of  the  various  colors.  In  this  way 
they  made  certain  that  as  far  as  packaging  went,  their  product 
would  be  perfect. 

The  carton  has  become  so  important  that  it  is  no  longer  a 
question  of  expediency,  but  a  question  of  analyzing  market  and 
product  with  a  view  towards  selecting  the  best  carton  suitable 
to  both.  This  should  be  one  of  the  important  results  of  the 
market  survey. 

Bulk  vs.  Packaged  Goods.  Tremendous  inroads  have  been 
made  by  packaged  goods  in  the  last  decade  on  the  sales  of  goods 
in  bulk.  Not  only  is  this  true  of  staple  foodstuffs,  sugar,  corn- 
meal,  rice,  etc.,  but  of  other  products,  such  as  tooth  brushes,  toys, 
and  handkerchiefs. 

In  connection  with  an  exhaustive  survey  of  coffee  made  by  the 
Chicago  Tribune  in  its  territory,  the  relative  demand  for  bulk 
and  packaged  coffee  among  grocers  was  thoroughly  covered.     It 


138  MARKET  ANALYSIS 

was  found  that  the  custom  of  packaging  coffee  in  quantities  of 
one  pound  or  over  compelled  the  smaller  purchaser  to  buy  in 
bulk;  that  an  idea  was  prevalent  that  bulk  coffee  is  fresher;  that 
there  wore  no  adulterants  in  bulk  coffee,  and  that  it  was  ordinarily 
cheaper. 

Quite  contraiy  to  this  were  the  findings  of  the  Milwaukee 
Journal  relative  to  the  bulk  and  package  market  for  rolled  oats. 
The  percentage  of  bulk  oats,  as  compared  with  the  total  sales  of 
all  forms  of  oats,  is  now  8.9  per  cent,  in  their  market.  The  reason, 
according  to  their  conclusions,  is  due  entirely  to  advertising,  which 
has  con\dnced  the  consimier  of  the  value,  quality  and  other  good 
features  of  packaged  over  bulk  oats. 

The  different  results  of  the  above  two  market  surveys  tend 
to  show  that  the  surveyor  is  not  certain  of  what  conclusions  he 
may  reach  in  regard  to  the  advisability  of  packaging  an  article. 
He  will  find  there  are  weighty  considerations  on  both  sides.  It 
is  only  when  the  price  of  the  raw  material  is  very  high  or  very 
low  that  there  is  difficulty  with  the  price  of  the  packaged  article. 
When  the  bulk  article  is  cheap,  price  must  sometimes  be  reduced. 
When  the  bulk  article  is  very  expensive,  the  reverse  must  be  con- 
sidered, reducing  the  size  of  the  carton,  or  increasing  the  price. 
Ordinarily  the  price  of  a  packaged  article  does  not  vary  so  much 
as  the  price  of  a  bulk  article,  since  the  consumer  of  packaged 
goods  is  paying  for  the  convenience  and  the  cleanliness  as  much 
as  for  the  contents.  From  the  storekeeper's  point  of  view,  the 
packaged  articles  are  also  much  easier  and  quicker  to  handle, 
and  he  is  frequently  inclined  in  favor  of  the  more  efficient 
method. 

What  the  surveyor  must  note  especially  in  this  connection 
is  the  opportunity  which  packaging  a  product  may  offer  in  remov- 
ing the  article  from  the  necessity  to  the  semi-luxuiy  class.  If 
he  can  prove  that  a  sufficiently  large  number  of  people  would 
buy  it,  even  at  the  increased  price,  it  might  be  a  veiy  wise  thing 
to  recommend  packaging  the  product. 

Units  of  Sale.  In  some  cases,  the  sui-veyor  will  find  the 
product  offered  for  sale  in  containers  the  size  of  which  is  quite 
unsuited  to  the  market.  The  common  method  of  avoiding  this 
is  to  have  a  sufficiently  large  range  of  units  to  meet  all  classes  of 
demand.     But  in  some  cases  this  is  not  feasible.     The  more 


THE  PRODUCT  TO  BE  MARKETED  13d 

nearly  the  size  of  the  product  is  standardized,  the  more  efficient 
does  production  become. 

Units  of  sale  are  not  by  any  means  permanent.  They  change 
from  time  to  time  with  changing  conditions  of  modern  life.  The 
stock  example  of  change  in  unit  of  sale  is  the  barrel  of  flour.  As 
pantry  space  became  more  and  more  restricted,  the  unit  size  of 
the  flour  barrel  became  a  sack  of  successively  smaller  dimensions. 

In  general,  products  that  deteriorate,  tooth  paste,  cereals, 
etc.,  are  sold  in  small  units,  while  products  with  indefinite  keeping 
quahties,  such  as  sugar,  flour,  etc.,  are  sold  in  as  large  units  as 
desired. 

Price  is  an  important  consideration  in  determining  the  unit  of 
sale,  but  not  always.  It  is  said  the  original  Uneeda  Biscuit 
package,  which  retailed  for  five  cents,  was  not  set  at  that  figure 
wholly  because  of  the  convenience  of  the  price,  but  also  because 
the  package  contained  as  many  crackers  as  the  average  family 
could  consume  before  the  quality  deteriorated.  There  are  cases, 
of  course,  where  price  is  the  sole  reason  in  determining  the  unit 
of  sale,  such  as  candy  in  a  vending  machine. 

If  the  surveyor  has  under  consideration  a  product  in  which 
containers  are  not  standardized,  such  as  baking  powder,  it  is 
difficult  to  judge  the  different  brands,  owing  to  the  discrepancy 
in  prices  and  the  wide  variation  in  size  of  the  package.  The 
majority  of  competing  products,  however,  are  marketed  in  pack- 
ages of  comparatively  similar  sizes.  Prepared  paint,  for  example, 
is  sold  in  the  half-pint,  pint,  quart,  and  gallon  sizes  by  practically 
all  manufacturers. 

In  how  large  quantities  do  people  wish  to  buy  this  product? 
In  the  case  of  a  tooth  brush,  it  is  one;  with  men's  handkerchiefs 
or  socks,  it  is  frequently  a  half  dozen  or  dozen.  The  surveyor 
may  derive  some  practical  advantage  for  the  company  by  a  study 
of  customary  units  of  sale.  Along  this  line,  the  mail  order 
houses  have  been  very  successful  in  the  attempt  to  sell  a  number 
of  units  together;  that  is,  a  half  dozen  towels  instead  of  one. 
They  do  this  simply  by  printing  prices  on  dozens  and  half  dozens 
ahead  of  quotations  for  the  single  article  in  their  catalogues. 

The  importance  of  the  unit  of  sale  varies  so  much  with  the 
nature  of  the  product  that  the  surveyor  must  use  his  own  judg- 
ment  as   to   any   possible   application.     He    should    remember, 


140  MARKET  ANALYSIS 

however,  that  the  unit  is  one  of  the  most  important  of  the  packag- 
ing; problems.  As  far  as  the  market  aspect  is  concerned,  it  is  the 
chief  consideration,  because  upon  the  unit  of  sale  in  large  measure 
depends  the  price  to  be  charged. 

Shape.  It  is  undoubtedly  much  more  difficult  to  package  a 
fiddle  than  a  dozen  pencils.  Yet  problems  of  shape  must  be  con- 
stantly met  and  solved  in  packaging.  In  some  cases  the  fragility 
of  the  product,  owing  to  its  character  or  shape,  may  necessitate 
a  particular  stj'le  of  package.  Great  difficulty  has  been  experi- 
enced in  packaging  eggs,  for  instance,  due  to  this  factor. 

The  whiskey  flask  was  made  to  fit  the  pocket.  Following 
out  this  idea,  the  makers  of  some  brands  of  tobacco  have  mer- 
chandised their  product  in  tins  curved  to  fit  the  product. 

Some  products  are  packaged  in  queer  shapes  because  of  the 
novelty  of  the  appeal,  for  example,  perfumeiy  bottles,  the  manu- 
facturers of  which  constantly  are  striving  after  the  bizarre. 

For  a  long  time,  cereals  were  packaged  in  oblong  cartons, 
but  not  long  ago,  the  Quaker  Oats  Company  adopted  a  cylin- 
drical package,  and  the  same  thing  was  done  b}^  Pettijohns.  This 
was  in  spite  of  the  fact  that  the  cylindrical  package  took  up  more 
room  in  shipping  cases. 

The  surveyor  will  find  ordinarily  that  he  will  have  little  to 
do  with  the  shape  of  the  package,  unless  customers  make  definite 
complaint  along  this  line.  Economic  conditions  ordinarily 
determine  the  shape  of  the  package  when  physical  obstacles  have 
been  overcome. 

Standardization.  De\aation  from  a  policy  of  uniform  quality 
in  packaged  goods  may  prove  fatal  if  allowed  to  occur  to  any  great 
extent.  Goodwill  is  such  a  dehcate  growth,  and  so  easily  blighted, 
that  the  manufacturer's  problem  is  to  keep  up  the  quality,  and, 
if  possible,  make  it  better.  In  any  event,  it  should  be  as 
represented. 

The  investigator  should  note  the  standard  quality  of  the 
goods  in  connection  with  complaints  from  dealers.  Undoubtedly 
it  is  highly  important  for  the  company  to  know  if  any  such  con- 
dition as  this  exists  and  rectify  it  without  delay. 

Serviceability.  Many  cartons  are  made  for  service  over  a 
long  period  of  time.  Cases  for  playing  cards  are  used  during  the 
life  of  the  product.     Cereals,  crackers,  and  other  foodstuffs  are 


THE  PRODUCT  TO  BE  MARKETED  141 

usually  left  in  the  containers  until  consumed.  Some  cartons  are 
returned  and  used  over  again,  such  as  milk  bottles,  biscuit  tins, 
kerosene  cans,  etc. 

Of  course,  from  the  viewpoint  of  market  analysis,  the  carton 
is  important  only  as  it  serves  to  help  the  marketing  fimction, 
and  not  from  the  container  point  of  view.  Yet  that  the  con- 
tainer does  help  to  sell  the  product  is  shown  by  the  well-known 
Shaker  Salt  carton,  which  is  of  material  assistance  in  selHng  the 
consumer.  The  surveyor  may  discover  that  his  product  may 
be  made  better  by  some  alteration  in  the  container  with  a  view 
towards  rendering  service. 

Other  Packaging  Considerations.  There  are  other  matters 
in  connection  with  packaging  which  may  or  may  not  be  impor- 
tant for  the  surveyor,  as  the  case  may  be.  Some  of  these  are 
discussed  briefly  in  the  following  few  paragraphs: 

The  advertising  and  publicity  value  of  the  carton  is  great. 
What  should  the  character  of  this  pubhcity  be?  Should  instruc- 
tions for  use  be  printed  on  the  package  or  enclosed  within?  Should 
the  name  of  the  company  be  prominent  or  not?  Should  other 
products  made  by  the  company  be  advertised  on  the  carton? 
All  these  questions  and  many  more  may  occur  to  the  sur- 
veyor 

There  is  undoubtedly  need  of  printed  matter  on  the  carton 
or  package.  In  a  great  many  cases,  such  as  food  and  drug 
products,  it  is  not  possible  to  sample  the  product,  and  the  outside 
wrapper  must  convey  to  the  consumer  the  character  and  quality 
of  the  contents.  Many  companies  show  pictures  of  the  carton 
in  their  regular  advertising  as  a  means  of  familiarizing  the  public 
with  its  appearance. 

Methods  have  been  invented  for  packaging  goods  which  do 
away  with  so  much  of  the  manual  labor  that  the  cost  of  packaged 
goods  has  been  materially  reduced.  The  investigator  might 
note  in  this  connection  the  methods  of  packaging  this  commodity 
with  those  used  by  competitors,  and  perhaps  find  out  the  possi- 
bilities of  new  methods  of  packaging,  even  more  economical 
than  the  present  method.  Most  large  scale  packaging  is  done 
by  large  scale  producers,  and,  in  fact,  is  more  or  less  confined 
to  them  because  of  cost. 

Of  what  material  is  the  carton  made?    Is  it  pasteboard,  glass, 


142  MARKET  ANALYSIS 

tin,  wood,  or  paper?     Is  the  material  adapted  to  the  package?     It 
might  be  possible  to  find  a  cheaper  material. 

What  about  the  package  for  dealers  and  jobbers?  Will  they 
buy  in  single  lots,  by  the  dozen,  hundred,  gross,  or  thousand,  and 
what  should  be  the  style,  size,  and  pubhcity  appeal  of  their 
packages? 

Doubtless  there  are  other  considerations,  not  mentioned  here, 
in  regard  to  the  packaging  problem  which  should  be  examined 
with  care  by  the  investigator.  Enough  has  been  said,  however, 
to  show  him  the  importance  of  this  phase  of  the  product  question. 
Packaging  is  increasing  steadily  in  importance  and  no  survey  of 
a  product,  the  nature  of  which  admits  of  being  merchandised  by 
this  method,  should  fail  to  take  into  consideration  the  advantages 
and  limitations  of   the  subject. 

General  Conclusions.  This  chapter  has  attempted  to  show 
the  surveyor  the  fundamental  nature  of  the  product  in  market 
analysis.  In  the  first  place,  by  classifying  the  product,  he 
may  obtain  an  insight  into  the  general  problems  affecting  that 
category.  He  has  defined,  furthermore,  his  product  according 
to  the  market  to  which  it  appeals  and  the  use  to  which  it  is  put. 
He  has  analyzed  its  size,  shape,  color,  and  its  other  physical 
characteristics.  He  knows  the  extent  of  the  luxuiy  demand 
present.  All  this  has  been  in  the  nature  of  definition.  He  has 
gone  farther.  He  has  investigated  the  policy  of  the  company  as 
it  affects  the  product.  He  has  investigated  the  lines  and  sizes, 
the  styles  and  types,  the  related  character  of  the  products,  the 
by-products,  and  other  factors  dependent  on  the  program  of  the 
company. 

He  also  knows  something  of  the  history  of  the  product,  its 
technical  and  mercantile  development.  He  has  information  on 
the  patent  situation,  and  lastly  he  has  investigated  thoroughly 
the  packaging  problem  with  its  various  subdivisions.  He  is  now 
in  a  position  to  go  ahead  confidently,  knowing  that  the  founda- 
tions are  laid  upon  which  he  can  build  his  survey. 


CHAPTER  IX 
THE  COMPANY 

Outline 

What  does  the  history  of  the  company  show? 
(a)  What  has  been  its  rate  of  growth? 
(6)   How  fast  and  how  far  have  its  markets  expanded? 

(c)  How  has  the  organization  developed? 

(1)  By  evolution? 

(2)  By  application  of  industrial  engineering  principles? 

(d)  What  has  been  the  company's  pohcy? 

(1)  Has  it  been  centered  on  production,  sales,  or  what? 

(2)  Has  it  been  opposed  to  innovation? 

(e)  What  has  been  the  financial  history? 

(1)  How  is  it  capitalized — bonds,  stocks,  notes,  etc.? 

(2)  What  is  its  credit  record? 

(3)  How  successful  has  it  been  with  collections? 

(/)    What  success  has  it  had  with  various  products  manufactured? 
Which  ones  have  been  failures?     Why? 

What  is  the  present  organization  of  the  company? 

(a)  Who  are  the  personnel  and  what  is  the  relation  between 

(1)  Executives? 

(2)  Foremen? 

(3)  Workmen? 

(b)  Is  company  centralized,  or  is  control  largely  (departmental? 

(c)  How  much  cooperation  exists  between  departments? 

What  do  the  company's  records  show? 

(a)  The  purchasing  department. 

(1)  Quantities  of  materials  purchased. 

(2)  Price  paid. 

(3)  Quality. 

(4)  Quantities  on  hand. 

(5)  Sources  of  supply. 

(b)  Production  department. 
(1)  Labor  statistics. 

(a)  Labor  turnover. 
(6)  Labor  efficiency, 
(c)   Rates  of  pay. 

143 


144  MARKET  ANALYSIS 

(2)  Machincrj'. 
(a)  Efficiency. 
(6)  Output, 
(c)   Range. 

(3)  Shipments. 

(4)  Miscellaneous  cost  statistics. 
(c)  Sales  department. 

(1)  Changes  m  sales  volume. 

(a)  By  salesmen's  territories. 

(b)  By  states,  counties,  cities,  etc. 

(c)  By  lines  of  goods. 

(d)  By  individual  salesmen. 

(2)  Volume  of  new  orders. 

(3)  Permanent  and  temporary  changes  in  sales  volume, 

WTiat  is  the  company's  plant? 

(a)  Geographical  location. 

(1)  Shipping  facilities. 

(2)  Proximity  to  market. 

(3)  Proximity  to  raw  materials. 

(b)  Capacity. 

(1)  Normal. 

(2)  Emergency. 

(3)  Minimum  at  which  profit  can  be  made. 

(c)  Equipment. 

(1)  Character,  modern  or  old-fashioned. 

(2)  Condition. 
id)  Age. 


CHAPTER  IX 
THE   COMPANY 

The  surveyor  will  find  that  methods  of  analysis  suitable  to 
the  study  of  the  product  cannot  be  applied  in  quite  the  same 
way  to  the  study  of  the  company.  Certain  set  questions  may  be 
apphed  to  the  product  with  good  expectation  of  success,  but  when 
approaching  the  company  which  makes  the  product,  the  investi- 
gator is  confronted  with  a  more  difficult  problem.  The  product 
is,  in  most  cases,  a  definite  tangible  thing  which  can  be  handled, 
measured,  and  weighed.  The  facts  concerning  it  can  be  ascer- 
tained with  comparative  accuracy.  But  the  very  word  company 
implies  a  human  element,  and  it  is  this  factor  of  uncertainty  with 
which  the  analyst  from  now  on  will  have  largely  to  deal. 

Psychologists  have  shown  that  even  human  factors  may  be 
reduced  to  more  or  less  set  rules.  But  the  difficulty  lies  in  obtain- 
ing sound  evidence  upon  which  to  base  deductions.  There  are  few 
companies  which  do  not  think  they  have  many  things  to  con- 
ceal, and  it  is  these  things  which  are  likely  to  be  the  meat  of  the 
whole  proposition. 

It  is  true  that  a  large  proportion  of  the  really  vital  matters 
can  be  disposed  of  by  a  more  or  less  routine  series  of  interviews. 
But  mistakes  are  likely  to  happen,  and  false  impressions  recorded. 
The  difficulty  of  getting  information  about  a  company  is  brought 
forcibly  home  to  the  surveyor  when  he  realizes  that  there  are 
comparatively  few  companies  which  thoroughly  understand  their 
own  affairs.  Whether  they  do  or  not,  the  sui-veyor  should  make 
it  his  province  to  grasp  them  thoroughly,  at  least  in  so  far  as 
they  come  within  his  sphere. 

The  Company's  Marketing  Function.  Every  company  acts  as 
interpreter  of  the  public's  desires.  To  be  successful,  it  must  fill 
wants,  and  to  be  preeminently  successful,  it  must  prepare  itself 
to  fill  these  wants  in  advance  of  their  occurrence.  That  is,  it 
must  be  able  to  predict  what  the  public  is  going  to  want. 

145 


146  MARKET  ANALYSIS 

The  survcj'or  probably  will  find  the  business  man  likelj^  to 
regard  his  company  as  the  all-important  consideration.  A  group 
of  buildings,  filled  with  equipment  and  material,  operated  by  a 
skilful  force  of  workers,  is  to  his  mind  a  picture  of  completeness. 
Yet  this  is  merely  the  structure  which  has  arisen  to  cany  out  the 
function  of  marketing.  In  reality,  the  company,  regardless  of 
how  extended  its  facilities  and  its  organization,  is  of  secondary 
importance.  It  is  but  a  means  to  an  end;  a  cog  in  the  machinery 
of  industiy  and  not, the  whole  machine.  It  stands  midway  be- 
tween the  raw  material  on  the  one  hand  and  the  finished  product 
on  the  other. 

Most  companies,  particularly  those  of  long  standing,  are  prone 
to  consider  themselves  dominant  and  masterful  agents.  They 
turn  out  whatever  product  seems  best  to  meet  with  their  approval. 
The}^  feel  it  their  prerogative  to  force  it  upon  a  public  which  has 
no  discrimination  to  refuse  it,  and  which  cannot  do  without  it. 
The  surveyor  should  make  sure  that  his  own  grasp  of  economic 
principles  is  sound  enough  to  enable  him  to  give  counsel  against 
this  attitude  which  must,  sooner  or  later,  prove  ruinous. 

A  manufacturing  concern  merely  performs  upon  raw  materials 
that  fabricating  function  which  the  public  insists  that  it  shall 
perform.  The  company  has  practically  no  volition  or  choice  in 
the  matter,  except  in  so  far  as  it  may  mold  public  opinion  by 
educational  or  other  methods.  The  moment  companies  try  to 
go  counter  to  public  demand,  they  run  into  danger. 

Every  company  is  surrounded  by  a  market,  which  is  its  breath 
of  Ufe.  It  stands,  in  fact,  midway  between  two  essential  markets, 
that  from  which  it  purchases  raw  materials,  and  that  to  which 
this  same  material  is  sold  after  it  has  been  converted  into  consum- 
able goods,  by  the  joint  efforts  of  labor  and  equipment. 

Thus,  every  company's  problem  proves  to  be,  in  the  last 
analysis,  a  marketing  problem.  The  surveyor  may,  accordingly, 
apply  to  any  of  them  the  following  two  questions: 

1.  What  does  the  market  require? 

2.  How  are  its  requirements  going  to  he  filled? 

He  will  find  hardly  a  point  arising  in  any  company  which  can- 
not be  reduced  to  these  lowest  terms.  All  departments,  whether 
sales,  purchasing,  or  production,  are  but  humble  contributing 
factors,  existing  only  to  assist  in  the  solution  of  these  questions. 


THE  COMPANY  147 

The  Personal  Equation  vs.  Company  Policy.  What  pitfalls 
beset  the  company  in  the  attempts  of  its  executives  to  cater  to 
the  market?  Companies  often  seem  to  differ  in  accordance  with 
the  temperament  of  the  men  who  founded  them.  Various  types 
of  mind  express  themselves  in  different  ways.  Men  with  the 
salesman  type  of  mind,  for  example,  originate  certain  kinds  of 
business  which  afford  them  free  play  for  their  particular  gifts. 
Commission  houses  and  advertising  agencies  are  usually  organized 
by  men  who  are  primarily  salesmen.  Men  with  financial  minds 
go  into  banking  and  insurance,  while  others  of  mechanical  bent 
go  into  manufacturing. 

Even  in  the  average  manufacturing  business,  the  surveyor 
may  observe  that  one  department  is  stronger  than  the  others. 
In  that  case,  he  will  doubtless  find  another  which  is  correspond- 
ingly weak.  This  lack  of  symmetry  often  arises  from  a  tendency 
of  the  executives  to  be  more  interested  or  more  expert  in  one 
function  of  business  than  in  another.  For  example,  a  company 
the  executive  talent  of  which  runs  along  mechanical  lines  is  apt 
to  produce  a  large  number  of  articles  which  have  been  evolved 
one  after  another,  and  apparently  as  the  result  of  individual 
genius.  Although  these  products  may  in  themselves  be  valuable, 
they  may  be  ill  adapted  to  the  sales  facilities  of  the  company. 
Men  in  charge  of  organizations  of  this  type  are  inclined  to  forget 
that  selling  is  just  as  important  a  part  of  the  business  as  manu- 
facturing, and  that  it  is  absurd  to  build  an  entirely  new  product 
unless  it  may  be  sold  through  the  same  channels  of  distribution 
as  the  rest  of  the  products,  or  unless  entirely  new  sales  facilities 
may  be  provided  expediently. 

On  the  other  hand,  the  investigator  may  encounter  a  manu- 
facturing concern  excelling  in  sales  talent,  and  less  well  equipped 
with  manufacturing  talent.  In  this  case,  he  will  probably  find 
a  well-developed  sales  department,  which  is  attempting  to  dispose 
of  almost  any  merchandise  appealing  to  its  customers.  The 
controlling  idea  in  such  a  company  seems  to  be  to  find  something 
to  sell  through  its  organization.  How  to  produce  the  commodi- 
ties for  sale  is  to  them  a  matter  of  entirely  secondary  impoi'tance. 
A  certain  company  of  this  type  manufactures  an  automobile  tire 
pump  and  an  automobile  lift  jack,  simply  because  both  of  these 
articles  appeal  to  practically  the  same  kind  of  buyer,  and  because 


14S  MARKET  ANALYSIS 

they  sell  through  the  same  channels.  These  two  products  are  so 
cUfiferent  from  a  manufacturing  jioint  of  view  that,  except  for  the 
reason  above  stated,  they  have  no  excuse  for  being  built  in  the 
same  plant. 

The  company  in  which  sales  and  production  functions  are  so 
correlated  as  to  be  supplementary  should  prove  most  successful. 
Whatever  conditions  may  exist,  the  results  of  the  market  analysis 
should  determine  the  true  status  of  affairs.  Delay  in  filling 
orders,  defective  goods,  poor  packing,  etc.,  should  denote  to  the 
surveyor  something  wrong  with  the  company's  products,  and 
failure  of  salesmen  to  make  proper  calls  and  keep  in  contact  with 
the  trade  indicates  w'eakness  in  the  sales  mechanism.  The  com- 
pany is  often  not  aware  of  such  weaknesses  until  they  are  brought 
out  by  some  outsider  such  as  the  market  analyst. 

To  sum  up,  the  surveyor  should  remember  that  a  great  part 
of  market  analysis  is  the  analysis  of  men.  He  should  study 
particularly  the  dominating  personalities  of  the  organization, 
study  their  training,  experience,  and  bent,  with  a  view  to  learning 
whether  there  is  a  leaning  toward  one  business  activity  at  the 
expense  of  another.  Tendencies  of  this  sort  are  often  hard  to 
discover,  and  are  harder  still  to  counteract.  Thus,  to  preserve 
his  unbiased  insight,  the  surveyor  should  avoid  becoming  too 
closely  associated  with  and  influenced  by  the  company's  "  grand 
old  man."  So  great  is  the  danger  of  such  an  obsession  that,  in  at 
least  one  instance,  the  surveyor  was  not  permitted  to  meet  the 
company's  leading  light,  and  for  fear  of  his  becoming  too  much 
imbued  with  its  historj'^  and  stereotyped  method  of  doing  business, 
he  was  permitted  but  an  hour  to  go  over  the  plant,  and  instructed 
to  obtain  his  data  almost  entirely  from  external  sources. 

History.  A  knowledge  of  the  company's  history  will  be  of 
assistance  in  getting  a  line  on  such  tendencies  as  those  above 
mentioned.  And  in  other  ways  some  company  history  will  prove 
of  value.  Most  executives,  however,  are  inclined  to  over-empha- 
size the  importance  of  history.  They  refer  to  it  on  every  occasion. 
In  many  cases,  the  surveyor  must  exclude,  as  irrelevant,  narrations 
of  what  happened  to  the  company  in  years  past. 

Those  matters  of  history  which  are  of  prime  unportance  are 
those  which  have  been  kept  track  of  through  actual  records. 
Unfortunately,  records  have  not  been  kept  in  many  cases  over  a 


THE  COMPANY 


149 


long  duration  of  years,  and  what  records  are  on  hand  are  not  always 
those  best  suited  to  the  surveyor's  purposes.  Records  may  often 
be  found  which  will  yield  quantitative  data  along  the  following 
six  lines: 

1.  Growth  of  Company. — The  growth  of  a  company  measured 
by  its  gross  sales  or  by  other  statistical  means  is  always  valuable 
to  the  analyst.     It  establishes  the  position  of  the  company  in  the 


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Fig.  25. — Chart  showing  the  Company's  Growth  as  Indicated  by  Sales. 

(Ernst  &  Ernst.) 

industry,  and  indicates  whether  it  has  obtained  its  share  or  more 
than  its  share  of  growth.  It  estabUshes  the  normal  rate  of  expan- 
sion and  allows  him  to  make  a  prediction  of  what  future  growth 
should  be.  Almost  any  histoiy  which  can  be  narrated  in  terms 
of  figures  will  serve  as  a  basis  for  forecasting  trends  of  growth. 
These  figures  should,  of  course,  be  charted  in  some  such  maimer 
as  illustrated  in  Fig.  25. 


150  MARKET  ANALYSIS 

2.  Growth  of  Market.  The  man  who  is  maldng  the  investi- 
gation can  study  the  extension  of  the  company's  markets  to  the 
best  advantage  at  this  juncture.  Few  companies  spring,  full- 
fledged  into  the  commercial  arena.  Most  of  them  are  slow  out- 
growths of  small  beginnings.  This  growth,  also,  should  be  charted 
territorially.  Account  should  be  taken  of  the  company's  custom- 
ore,  who  they  were,  especially  the  big  ones,  how  many  of  them 
still  remain  on  the  books,  etc.  These  considerations  will  be 
treated  in  greater  detail  in  the  chapters  on  Customers  and  Markets. 

3.  The  Organization.  Most  companies  are,  as  above  stated, 
merely  evolutionary,  or  perhaps  it  would  be  better  to  say,  have 
been  so,  since  many  of  them  are  now  organized  with  a  view  to 
the  future  and  not  merely  to  the  present  or  past.  But  it  is  still 
necessary  to  study  the  organization  and  its  history.  Perhaps 
the  surveyor  can  obtain  a  series  of  organization  charts,  if  research 
of  this  sort  promises  to  have  a  bearing  upon  his  problem.  It  is 
difficult,  perhaps,  to  see  what  this  has  to  do  with  marketing,  but 
the  statement  must  be  repeated  that  everything  in  the  way  of 
company  activity  has  to  do  with  this  all-enveloping  function. 

4.  Finance.  Finance  is  one  of  the  serious  limiting  factors 
which  must  be  considered  in  connection  with  the  company.  It 
can  usually  be  divided  in  a  general  fashion  into : 

A.  Securities.  Under  this  heading  it  is  well  for  him  to  make 
a  note  of  issues  outstanding,  whether  stocks,  bonds,  or  notes,  etc.; 
also  of  the  number  of  holders,  market  prices,  fluctuations,  etc. 
The  latter  factors  will  usually  show  the  company's  financial 
standing  as  well  as  anything,  for  although  they  may  be  influenced 
by  conditions  in  the  industry  at  large,  yet  they  will  also  reflect 
the  credit  of  the  company  itself,  when  compared  with  the  average 
price  of  the  securities  of  other  companies  in  the  same  class. 

B.  Credits.  One  of  the  most  valuable  operating  assets  of  a 
company  is  its  credit.  The  investigator  should  not  be  surprised 
to  find  any  unstable  financial  condition  reflected  through  the  entire 
organization.  Whatever  he  discovers  in  the  credit  situation 
should  be  carefully  noted.  He  may  find,  for  instance,  that  there 
are  countless  small  leaks,  since  it  is  often  hard  to  collect  petty 
cash  items.  Big  credit  accounts  are  always  carefully  investigated. 
This  matter  of  credit  is  only  one  of  the  many  seemingly  extraneous 
matters  that  have  to  be  examined. 


THE  COMPANY  151 

C.  Collections.  Since  the  function  of  the  collection  depart- 
ment is  closely  allied  to  sales,  it  should  be  given  careful  scrutiny. 
There  are  times  when  it  is  advisable  to  grant  long-term  payments 
to  obtain  desirable  business,  and  there  are  times  when  it  is  advis- 
able to  curtail  them.  These  periods  have  a  definite  connection 
with  the  state  of  the  market.  For  instance,  a  period  of  financial 
stringency  is  not  always  the  time  to  insist  upon  prompt  payments, 
nor  a  time  of  prosperity  the  occasion  for  extended  credit.  The 
surveyor  may  find  it  helpful  in  this  connection  to  compile  a  chart 
showing  the  company's  credit  losses,  etc. 

5.  Unsuccessful  Products.  Another  matter  of  history  of 
possible  value  is  a  discussion  of  unsuccessful  products  put  out 
by  the  company.  Why  did  they  fail?  Was  the  trouble  with  the 
market  or  with  the  product?  Was  the  failure  attributable  to  the 
sales  department,  to  the  production  department,  or  to  the  develop- 
ment department?  Is  there  still  a  demand  for  this  innovation,  and 
would  it  fulfil  present  needs  if  again  produced,  and  properly  mar- 
keted? Products  sometimes  fail  for  unusual  reasons.  Farm 
tractors  were  unsuccessful  in  the  Phihppines  as  long  as  no  suit- 
able provision  was  made  for  service.  Remoteness  from  the  source 
of  supply  made  specialized  service  and  a  complete  stock  of  parts 
essential  to  the  marketing  of  these  products.  Many  a  surveyor 
has  received  his  master  inspiration  from  a  ramble  through  the  loft 
or  basement  where  unsuccessful  models  are  stored. 

6.  Ordeals.  The  recent  ordeals  which  a  company  has  passed 
through  rarely  fail  upon  careful  study  to  have  a  direct  bearing 
upon  the  company's  marketing  problem.  These  have  served  as 
practical  experience  under  fire  for  the  officials  of  the  company,  and, 
like  returned  soldiers,  they  never  tire  of  relating  their  experiences. 

There  is,  of  course,  danger  that  the  recent  obstacles  and 
catastrophes  will  loom  so  large  as  to  obscure  the  true  panorama, 
and  the  surveyor  should  try  to  make  allowances  for  the  purely 
ephemeral  obstructions. 

In  conclusion,  it  seems  obvious,  from  a  review  of  the  above 
phases  of  the  company's  history,  that  there  can  be  no  hard-and- 
fast  rules  for  analyzing  the  various  factors  which  must  be  con- 
sidered. The  surveyor  must  obtain  his  facts  after  the  manner 
of  the  engineer;  he  must  record  them  with  the  painstaking  accu- 
racy of  the  scientist;  and  he  must  interpret  them  after  the  manner 


152  MARKET  ANALYSIS 

of  the  long-experienced  business  man.  Nothing  but  experience 
can  teach  him  the  habits  by  which  such  men  work;  but  if  he 
learns  their  several  methods  of  operating,  and  applies  them  in 
their  proper  places,  he  will  only  then  be  able  to  master  his 
difficult  task. 

Personnel.  As  previously  stated,  no  adequate  understanding 
of  any  company  is  obtainable  without  a  first-hand  knowledge  of 
the  men  who  compose  it.  The  surveyor  ought  to  get  acquainted 
with  the  chief  executives;  but  he  ought  not  to  limit  himself  to 
any  one  man  or  group  of  men  in  the  organization.  Even  to  meet 
the  men  in  other  departments  for  a  few  minutes  is  better  than 
nothing.  If  the  department  heads  are  not  available,  their 
assistants  should  be  consulted. 

Every  market  presents  so  large  a  problem  that  there  is  danger 
of  treating  it  in  a  one-sided  manner.  The  menace  of  getting 
a  biased  viewpoint  is  more  to  be  feared  than  anything  else  in  work 
of  this  kind. 

The  investigator  should  remember  that  the  personnel  is  not 
confined  to  the  executives  and  the  foremen,  but  includes  the 
workmen.  Whether  the  latter  are  skilled  or  unskilled,  male  or 
female,  satisfied  or  disgruntled,  highly  paid  or  undeipaid,  efficient 
or  careless,  they  cannot  be  ignored.  They  make  an  important 
basis  of  comparison,  and  allow  the  formation  of  a  ratio  of  value 
to  conditions  in  other  companies. 

The  Company  as  a  Whole.  Before  undertaking  a  discussion 
of  the  various  departments,  it  is  good  policy  for  the  investigator 
to  consider  the  company  as  a  whole  and  the  relations  of  the  various 
departments  to  each  other.  This  he  should  do  early  in  his  investi- 
gation, while  he  sees  the  whole  scheme  in  perspective,  and  as  a 
unit.  Here,  as  always,  he  should  consider  the  company  in  terms 
of  the  market.  Is  this  company  fitted  to  make  this  product  and 
to  merchandise  it?  This  same  question  may  be  applied  to  each 
of  the  company's  departments.  Do  they  all  stand  this  acid  test 
of  adequacy?  Wherein  do  they  fall  short?  There  may  be  some 
seemingly  minor  factor  which  will  be  to  blame.  A  retail  house 
which  was  losing  money  was  surprised  by  the  discovery  that 
thirty  per  cent,  of  charge  packages  was  returned.  Once  this 
oversight  was  rectified,  the  concern  was  brought  back  again  to 
a  profitable  basis. 


THE  COMPANY  153 

The  relative  importance  of  the  purchasing,  the  production, 
and  the  sales  departments  of  various  businesses  tends  to  show 
considerable  variations.  For  instance,  where  the  manufacturing 
process  adds  little  value  to  the  raw  material,  the  purchasing  end 
must  be  managed  with  the  greatest  economy.  This  apphes  to 
many  cheap  articles  of  a  competitive  nature,  particularly  neces- 
sities,— soap,  matches,  staple  food  stuffs,  etc.  Where  the  jnanu- 
facturing  process  practically  makes  the  value  of  the  product,  such 
as  clocks,  precision  instruments,  lenses,  etc.,  the  purchasing  is 
far  less  important  than  production  and  labor.  The  relative 
importance  depends  upon  the  percentage  of  material  cost  entering 
into  the  final  cost  of  the  product.  The  significance  of  the  sales 
department  depends  in  some  measure  upon  competition  and  upon 
unfilled  demand.  In  many  cases  purchasing  may  be  practically 
done  by  the  sales  department,  or  it  may  be  necessary  to  receive 
its  permission  before  actually  purchasing. 

Finally,  the  surveyor,  particularly  if  he  is  a  novice,  should  be 
warned  against  the  danger  of  examining  the  various  departments 
individually,  before  he  views  them  collectively.  The  first  thing 
to  study  about  any  company  is  its  coordination. 

The  Purchasing  Department.  The  study  of  markets  is  as 
much  a  problem  for  the  purchasing  agent  as  for  the  sales  manager. 
Although  in  detail  the  approach  to  their  market  studies  is  some- 
what different,  the  fundamentals  are  the  same  in  both  cases. 

The  surveyor  must  not  forget  that  a  market  is  a  place  where 
one  buys  as  well  as  sells.  Although  the  purchasing  agent  wants  to 
pay  as  little  as  he  must,  and  the  sales  manager  obtain  as  much 
as  he  can,  in  all  but  a  few  isolated  instances  the  day  has  probably 
gone  when  the  purchasing  agent  looks  merely  upon  a  transfer  of 
goods  from  the  buyer's  standpoint  and  when  the  sales  manager 
neglects  to  look  at  things  from  the  standpoint  of  his  customer. 

Purchasing  is  usually  done  either  in  quantities  for  spot  delivery, 
or  contract  for  future  delivery.  It  may  be  done  independently 
or  on  requisition  from  the  production  department.  It  may  be 
done  by  a  combination  of  all  these  methods. 

Market  analysis  for  the  purchasing  department  is  in  a  sense 
prediction.  It  is  very  important  to  know  at  specific  times  whether 
buying  should  be  done  on  contract  or  goods  purchased  outright. 
Plow  far  apart  the  two  quotations  may  range  is  shown  in  Fig.  26. 


154 


MARKET  ANALYSIS 


Although  it  is  true  that  the  war  was  the  cause  of  this  fluctuation, 
there  is  usually  a  difference  of  such  degree  that  material  savings 
may  be  effected  by  the  wise  purchasing  agent. 

The  investigator  will  get  from  purchasing  records  much  infor- 
mation as  to  raw  materials,  their  sources,  price  fluctuations,  etc. 

Tlie  main  problem,  however,  is  to  ob- 
serve how  well  the  functions  of  pur- 
chasing are  correlated  with  those  of 
sales  and  production.  He  should 
remember  that  each  department  of  the 
company,  is,  after  all,  but  a  cog  in  a 
machine,  and  that  the  motion  of  one 
should  be  regulated  by  that  of  the 
other  cogs. 

The  Production  Department.  After 
the  materials  have  been  purchased, 
they  must  be  manufactured.  This 
business  of  production  has  been  or- 
ganized to  the  nth  degree.  In  so  far 
as  any  department  of  the  company  can 
be  made  perfect,  the  production  de- 
partment is  apt  to  be  that  one.  In  all 
probability,  the  surveyor  should  find  a 
great  many  records  available  for  study. 
Whether  they  will  be  of  interest  to 
him  will  depend  largely  on  the  scope 
of  his  investigation.  Among  others,  he 
may  find  labor  statistics,  machine  rec- 
ords, records  of  output  and  records  of 
shipments. 

He  will  also  find  figures  on  the  cost 
of  production.  It  may  be  necessary 
for  him  to  study  these  statistics  in 
order  to  reckon  the  saving  effected  by 
increased  production.  Instead  of  making  1000  pieces  at  ten 
cents,  suppose  it  were  possible  to  make  10,000  pieces  at  five  cents. 
The  question  of  course  would  be  if  10,000  pieces  could  be  made 
at  a  sufficient  margin  of  profit  so  that  actual  profits  would  be 
greater.     Since  the  purpose  of  the  market  investigation  is  usually 


-=>  -^  T  -3 
•913     1914    1915     1916     1917     1918 

Fig.  26. — Chart  Contrasting 
Contract  and  Spot  Prices. 
(Government  Report.) 


THE  COMPANY 


155 


prefatory  to  increasing  sales,  this  matter  of  production  is  of  great 
importance.  Not  only  must  the  surveyor  know  how  much  it 
will  cost  to  increase  production,  but  how  much  production  can  be 
increased  economically. 

In  studying  this  question,  the  surveyor  should  make  a  chart 
such  as  is  shown  in  Fig.  27,  of  the  relative  cost  of  the  various 
component  parts  of  the  product.  In  the  illustration,  it  will  be 
seen  that  the  body  casting  of  the  jack  is  by  far  the  greatest  cost. 
If  it  were  possible  to  discover 
some  cheaper  method  of 
making  the  major  parts,  then 
the  cost  of  production  would 
be  greatly  reduced. 

The  business  man  should 
not  be  surprised  if  the  investi- 
gation is,  to  a  considerable 
extent,  covering  the  ground 
supposedly  sacred  to  the 
industrial  or  "  efficiency  " 
engineer.  But  no  considera- 
tion of  markets  is  complete 
or  even  possible  without  an 
understanding  of  production. 

The  production  engineer  may  possibly  do  his  work  effectually 
without  a  knowledge  of  sales,  but  the  market  engineer  cannot 
operate  without  a  grasp  of  the  outstanding  features  of  production. 
The  surveyor  should  be  made  to  feel  that  he  is  expected  to  dip 
into  all  phases  of  the  company's  activity.  On  the  other  hand,  he 
should  reahze  that  he  is  being  placed  in  a  position  of  extreme 
trust.  It  should  be  his  aim  to  accept  his  remarkable  opportunity 
to  be  a  coordinating  influence. 

The  Technical  Work.  Every  progressive  company  has  a  tech- 
nical department  in  some  form  or  other.  Here  again,  the  sur- 
veyor should  be  made  welcome.  Technical  research  and  market 
research  should  be  done  in  conjunction  with  a  well  organized 
marketing  plan.  Aimless  research  may  sometimes  bring  startling 
results,  but  these  arc  not  always  of  a  commercial  nature.  The 
American  Telephone  &  Telegraph  Company  has  many  experts 
employed  in  technical  research.     To  each  man  is  given  a  definite 


Fig.  27. — Relative  Cost  of  Components. 


150  MARKET  ANALYSIS 

problem  to  solve,  the  solution  of  which  will  be  of  specific  benefit 
to  the  company.  After  the  scientist  finishes  with  it,  the  men  at 
the  practical  entl  of  the  business  pass  judgment  upon  it.  In  this 
way,  eveiy  phase  of  the  subject  is  thoroughly  examined. 

The  surveyor  should  study  this  arm  of  the  company's  service 
because  experimental  work  in  most  companies  is  carried  on  with- 
out due  regard  to  an  understanding  of  markets.  If  as  much  pains 
were  taken  in  analyzing  markets  as  in  perfecting  the  products 
intended  for  the  markets,  fewer  companies  would  meet  with 
failure.  For  the  best  results,  technical  research  and  market 
research  should  go  hand  in  hand. 

The  Plant.  The  plant  is  the  shell  which  contains  the  company. 
A  visitor  is  apt  to  judge  a  great  deal  by  the  company's  plant,  and 
particularly  from  its  appearance.  This  method  of  observation 
has  as  much  value  as  judging  a  man  by  the  clothes  he  wears.  It 
is  true  generally,  but  not  always. 

In  considering  the  plant,  the  survej^or  should  study  the  geo- 
graphical location,  the  size  and  capacity,  the  equipment  and  the 
plant  organization. 

How  is  the  plant  situated  geographically,  and  does  this  matter 
of  location  handicap  or  further  production?  This  question  may  be 
of  great  importance  to  the  investigator.  He  should  consider 
it  in  relation  to  transportation  facilities,  proximity  to  markets, 
raw  materials,  and  labor,  etc.  It  is  one  of  those  problems  which 
the  specific  conditions  in  his  investigation  will  make  important 
or  not  worth  considering. 

How  is  the  company's  plant  suited  in  size  and  capacity  to  its 
product  and  market?  For  what  other  kinds  of  manufacturing 
are  the  company's  plants  fitted?  What  is  the  normal  capacity  of 
the  plant,  and  what  is  its  maximum  capacity?  Are  new  buildings 
needed?  The  surveyor  can  never  tell  in  advance  which  one  of 
these  factors  may  be  of  importance,  since  they  all  may  have  a 
bearing  on  the  market.  Oftentimes,  merely  to  see  such  facts 
in  writing  will  suggest  a  direct  marketing  principle. 

Is  the  machinery  up-to-date?  Are  the  buildings  modem  and 
in  good  repair?  How  does  the  company's  equipment  compare 
with  that  of  competitors?  The  condition  of  the  machinery,  the 
type  and  the  model,  the  power  used,  may  make  such  a  difference  in 
cost  of  production  as  to  affect  the  whole  marketing  problem. 


THE  COMPANY  157 

Does  the  plant  function  smoothly,  or  is  there  friction?  Do 
the  heads  and  foremen  of  the  different  departments  cooperate 
with  each  other?  Has  there  been  any  experience  with  scientific 
management? 

The  above  questions  are  merely  suggestive  as  to  what  the 
surveyor  should  ask  himself  when  entering  the  plant.  Many 
other  points  will  occur  to  him  during  his  inspection.  Whatever 
impressions  he  may  receive,  however,  he  must  check  up  by  other 
facts  at  his  command.  He  should  ask  himself:  "  Even  although 
it  appears  on  the  surface  that  such  and  such  a  thing  is  wrong, 
how  does  it  actually  work  out?" 

The  Sales  Department.  Without  question,  the  sales  depart- 
ment is  the  most  important  division  of  the  company  for  the  sur- 
veyor to  study.  Owing  to  its  importance,  the  subject  of  sales 
has  been  treated  at  length  in  a  later  chapter.  However,  it  will 
do  no  harm  to  state  here  that  the  surveyor  should  get  much 
specific  information  from  the  sales  records.  He  can  get  volume 
of  sales  and  can  determine  if  demand  has  fallen  off  or  increased. 
If  the  records  have  been  kept  geographically  or  territorially, 
he  can  determine  exactly  where  the  increase  or  decrease  is. 
Most  important  of  all,  through  these  records,  the  surveyor  in  many 
cases  may  determine  the  permanent  and  the  temporary  causes 
for  changes  in  sales  volume. 

Conclusions.  Eveiy  company  has  plans  for  the  future. 
These  are  usually  formulated  at  the  expense  of  careful  thought 
on  the  part  of  the  executives,  and  have  a  very  distinct  connection 
with  the  task  of  the  market  analyst.  Yet,  if  the  findings  of  the 
surveyor  are  to  be  of  any  value,  they  should  be  applied  to  the  com- 
pany's plans.  These  plans  should  be  predicated  upon  his  find- 
ings, rather  than  that  his  work  should  be  based  upon  the  plans. 

In  studying  the  company,  as  in  any  kind  of  commercial 
research,  you  have  general  facts  and  specific  facts  to  deal  with. 
In  the  company  you  have  material  facts  on  the  one  hand  to 
analyze  and  personalities  and  other  such  elusive  considerations 
on  the  other.  Of  course,  the  personalities  in  the  company  are 
absolutely  a  part  of  its  prol^lcm,  and  no  market  survey  which  is 
suitable  for  a  given  company  will  fit  the  same  case  in  the  event 
of  a  complete  reorganization  and  a  substitution  of  new  men  for 
the   old.     In   other   words,    the   surveyor   must   have   practical 


158  MARKET  ANALYSIS 

common  sense  enough  to  judge  the  men  with  whom  he  is  working 
and  not  put  up  to  them  something  quite  beyond  their  abihty  to 
accomphsh. 

But,  in  general,  in  tlie  company,  even  as  with  the  product, 
the  specific  facts  should  be  held  to  as  closely  as  possible.  It  will 
be  seen  in  the  following  chapter,  and  in  others  to  come,  that  once 
the  surveyor  gets  beyond  the  confines  of  the  plant,  he  will  find  of 
necessitj^  that  he  is  dealing  with  a  great  mass  of  generalities  and 
that  the  opportunity  for  obtaining  specific  data  with  accuracy 
becomes  greatly  restricted. 


CHAPTER  X 
THE   INDUSTRY  IN   GENERAL 

Outline 

What  is  the  volume  of  production  in  the  industry? 
(a)  Is  it  decreasing  or  increasing? 
(6)   How  does  it  compare  with  the  company's  record? 
(c)   Have  there  been  marked  fluctuations  in  production  in  the  industry? 

What  is  the  value  of  production  in  the  industry? 
(a)  Is  it  decreasing  or  increasing? 

(6)  How  does  it  compare  with  the  value  of  the  company's  production? 
(c)   Have  there  been  marked  fluctuations  in  the  industry? 

How  does  the  industry  rank  in  investments? 

What  is  the  number  of  producing  firms  in  the  industry? 
(a)  Has  this  number  decreased  or  increased? 

How  many  people  are  engaged  in  the  industry? 

(a)  What  is  the  percentage  of  women  and  children? 

(b)  How  does  the  average  wage  in  the  industry  compare  with  that  paid 

by  the  company? 

What  is  the  labor  situation  in  the  industry  as  pertaining  to 
(a)  The  degree  of  unionization? 
(6)  The  amount  of  unrest? 

(c)  The  employment  of  women? 

(d)  The  foreign  element? 

How  dependent  is  this  industry  on  conditions  existing  in  other  industries? 

What  is  the  eff'ect  of  economic  trends  on  the  industry? 

(a)  Arc  there   influences  at  work  tending  towards  localization  of  the 
industry  due  to 

(1)  Proximity  to  raw  material? 

(2)  Fuel  supply? 

(3)  Labor? 

(4)  Transportation  facilities? 

(5)  The  market? 

(6)  Other  factors? 

159 


160  MARKET  ANALYSIS 

What  is  the  geographical  grouping  of  the  industry? 

(a)  How  is  the  company  located  in  respect  to  the  remainder  of  the  industry? 

Is  there  a  tendency  towards  integration  of  functions? 

(a)  Is  it  directed  towards  control  of  raw  materials? 

(b)  Or  towards  control  of  retail  outlets? 

Is  there  a  tendencj'  away  from  or  towards  combination? 

(o)  Is  size  an  advantage  or  disadvantage  in  the  industry? 

WTiat  is  the  effect  of  foreign  progress  on  the  industry? 

(a)  Foreign  methods  of  manufacture. 

(b)  Sources  of  supply. 

(c)  Cheap  labor. 


CHAPTER  X 
THE   INDUSTRY  IN    GENERAL 

For  any  person  conducting  a  market  survey,  the  general 
industry,  of  which  his  company  forms  a  part,  serves  as  a  back- 
ground for  comparison.  Ordinarily,  there  will  be  little  difficulty 
in  obtaining  statistics  on  this  topic.  The  government  has  made 
exhaustive  studies  of  many  industries,  and  so  also  have  many 
trade  organizations  and  trade  papers.  These  statistics  are  readily 
available.  In  the  majority  of  cases,  gathering  the  information 
about  the  industry  will  be  largely  a  bibliographical  task. 

Following  are  some  of  the  more  important  results  which  may 
come  from  a  study  of  the  industry  in  general,  and  which  will  lend 
themselves  easily  to  comparison  with  figures  of  a  similar  nature 
obtained  from  the  company. 

Statistics  of  the  Industry.  How  much  is  produced  in  the  indus- 
try? Is  volume  of  production  increasing  or  decreasing,  and  how 
does  it  compare  with  the  volume  of  production  of  the  company 
itself?  Has  the  company's  rate  of  growth,  in  other  words,  been 
proportionate  to  that  of  the  industry? 

Volume  of  production  in  an  industry  lends  itself  easily  to 
charting.  Fig.  28  shows  the  production  in  the  petroleum  industry. 
Here,  domestic  production  is  shown  in  comparison  with  that  of  the 
world.  On  the  same  chart  the  production  of  a  single  company 
might  also  be  plotted. 

The  surveyor  should  expect  to  find  the  survey  for  both  the 
industry  and  the  company  running  fairly  parallel,  although  the 
company's  growth  ought  to  show  a  somewhat  sharper  rise. 

Charts  of  this  nature  will  give  the  student  an  excellent  idea 
of  the  broader  aspects  of  his  task,  and  they  are  good  to  come 
back  to  and  contemplate  after  a  day's  siege  with  little  details. 
There  cannot  be  too  much  repetition  of  one  statement — that  the 
surveyor's  main  success  depends  upon  maintaining  his  perspective, 
his  true  sense  of  proportion. 

161 


162 


MARKET  ANALYSIS 


No  single  chart,  of  course,  will  give  him  a  complete  pano- 
rama. Volume  of  production  alone  is  not  always  an  accurate 
index.  Value  of  production  may  be  more  important  than  volume. 
A  comparative  chart,  showing  the  relative  values  of  production 
in  the  industiy  and  in  the  company,  will  throw  some  light  on  the 
past  success  of  the  company  in  merchandising  profitably  its 
products.  The  company's  value  of  production  may  often  be 
taken  as  an  index  of  the  excellence  of  the  sales  department. 

There  are,  of  course,  other  statistics  which  will  throw  light 
upon  the  character,   status,   and  history  of  the  industry.     The 


Barrels 


J50,00q000 


1585  1890  1895  1900  1905  1910  1915  1920 

Fig.  28. — Petroleum  Production  Charted.     (Arthur  D.  Little,  Inc.) 


amount  of  money  invested  in  it  may  often  be  ascertained,  for 
example.  Its  general  rank  among  the  other  industries  of  the 
country  may  prove  enlightening.  Figures  may  be  obtained  for 
most  industries  from  the  Census  of  Manufactures.  Here,  as  in 
the  previous  two  sections,  a  chart  may  be  made  showing  the 
growth  of  investments  in  the  industry  over  a  period  of  time,  and 
the  corresponding  growth  of  the  company.  The  investments  in 
the  industry  nationally  denote  the  purchasing  power  of  the  industry 
as  a  whole.  The  investments  in  the  company  denote  its  relative 
standing. 

Economic  Tendencies.  Throughout  his  work,  the  surveyor 
should  keep  in  mind  that  the  gathering  of  data  is  not  an  end 
itself.     A  graph  showing  the  growth  of  an  industry  is  of  no 


THE  INDUSTRY  IN  GENERAL  163 

particular  value,  as  far  as  immediate  profits  are  concerned.  It 
is  only  one  of  the  foundation  stones.  But  it  is  a  firm  one.  Upon 
it  can  be  based  estimates  as  to  future  growths.  These  broad 
tendencies,  indeed,  are  abnost  invariably  studied  in  order  to 
serve  as  a  basis  for  predictions. 

Broad,  epoch-making  tendencies  ordinarily  cast  their  shadows 
before.  By  studying  the  industiy,  the  surveyor  is  obviously 
in  a  position  to  form  a  better  judgment  on  future  developments 
than  as  if  he  confined  himself  entirely  to  the  company.  A  study 
of  the  aeroplane  industiy  indicates  the  probability  that  mail  car- 
rying will  eventually  be  by  aeroplane.  He  can  observe  whether 
these  tendencies  away  from  present  practice  are  gaining  headway, 
and  if  so,  how  much  and  how  rapidly.  No  mere  study  of  the  com- 
pany will  give  him  any  quantitive  data  on  such  a  development; 
but  examination  of  statistics  of  the  industry  will  put  him  in  a 
better  position  to  discuss  the  company's  plans,  and  he  will  be 
able  to  tell  whether  they  are  running  with  the  trend  of  change  or 
against  it. 

There  are  many  economic  tendencies  visible  today,  some  of 
them  showing  signs  of  becoming  permanent,  others  merely  ephem- 
eral and  already  fading  out  of  the  business  perspective.  Some 
of  the  very  vital  problems  before  us,  which  will  remain  for 
several  years,  at  least,  are  those  of  the  middleman  and  his  future, 
of  competition  as  opposed  to  monopoly,  of  integration  of  indus- 
try, and  of  the  progress  of  unionization  of  labor.  We  have  also 
the  most  important  question  of  the  part  our  industries  are  going 
to  play  in  international  commerce.  All  of  these  tendencies 
deserve  attention  in  any  long-range  survey. 

In  connection  with  the  industry  in  general,  the  surveyor 
should  remember  that  industry  is  constantly  undergoing  periods 
of  prosperity  and  depression.  Business  progress  is  marked  by 
ups  and  downs.  At  the  beginning  of  every  period  of  prosperity, 
markets  become  active.  There  is  a  call  for  merchandise.  The 
wheels  of  production  are  set  in  motion.  Goods  are  turned  out  in 
large  quantities  and  with  ever  increasing  momentmn,  which 
continues  until  the  need  behind  it  is  satisfied.  But  even  after 
the  demand  has  been  filled,  the  inertia  of  production  keeps  on, 
until  the  point  is  reached  when  the  action  of  the  law  of  supply , 
and  demand  effects  a  drop  in  prices.     This,  in  turn,  makes  it 


104  MARKET  ANALYSIS 

incroasinc;ly  (lifficult  for  the  producer  and  manufacturer  to  turn 
out  coniniodities  at  a  profit.  The  result  is  a  glutting  of  markets, 
a  curtailment  of  production,  and  a  stringency  of  money.  A 
corresponding  period  of  depression  thereupon  sets  in.  Factories 
close,  there  is  much  unemployment,  a  decrease  in  commodity 
prices  and  a  decrease  in  wages  takes  place.  Finally,  when  adver- 
sity has  made  men  more  industrious  and  less  wasteful,  and 
when  the  stock  of  commodities  is  exhausted,  the  cycle  recom- 
mences. 

Owing  to  the  improvement  in  facilities  for  transportation  and 
communication,  to  the  ever  more  aggressive  competition  and  the 
insatiable  desire  for  material  wealth,  business  has  become 
national  rather  than  local,  and  international  rather  than  national. 
As  a  result  of  this,  and  also  because  conditions  in  all  countries 
are  seldom  in  a  state  of  depression  at  the  same  time,  the  ups  and 
downs  of  business  are  less  marked  than  formerly.  The  produc- 
tion of  goods  is  becoming  more  and  more  constant  throughout 
the  world.  Since  markets  fluctuate  in  obedience  to  supply  or  pro- 
duction, they  too,  are  less  given  to  violent  movements,  and  it 
is  hence  becoming  more  and  more  difficult  to  understand  every 
complexity  and  peculiarity  of  marketing  problems. 

Combination  and  Integration.  One  of  the  most  significant 
of  these  economic  trends  as  far  as  market  survey  work  is  con- 
cerned is  the  tendency  in  some  industries  for  certain  large  com- 
panies to  control  them,  from  the  raw  material  stage  to  the  time 
of  completion.  The  surveyor  will  find  cases  where  this  so-called 
process  of  integration  is  taking  place.  Among  those  manufac- 
turing establishments  where  prosperity  depends  in  large  degree 
upon  their  constant  and  uniform  supply  of  raw  materials,  many 
concerns  are  reaching  out  and  acquiring  their  own  sources  of 
supply. 

In  a  similar  fashion,  some  companies  are  enlarging  their 
activities,  and  acquiring  retail  stores  in  which  to  market  their 
products.  The  United  States  Steel  Corporation  has  purchased 
ore  lands  and  coal  lands  to  such  an  extent  that  it  is  now  in  a 
manner  independent  of  sources  of  supply.  The  Douglas  Shoe 
Company  and  others  have  established  retail  stores  to  take  care  of 
their  production.  The  chain  grocery  stores,  of  which  the  Great 
Atlantic  &  Pacific  Tea  Company  is  the  largest,  have  taken  over 


THE  INDUSTRY  IN  GENERAL  165 

the  warehousing  function  of  the  jobber,  and  m  this  way  are  able 
to  offer  their  goods  at  prices  considerably  lower  than  those  of  local 
and  independent  competitors,  who  deliver  their  goods. 

The  important  point  for  the  surveyor  is  to  isolate  the  particular 
tendencies  which  are  taking  place  in  his  industry.  It  may  not 
be  so  apparent  as  the  examples  cited  above.  But  whatever  it  is, 
he  may  be  sure  it  will  prove  to  be  of  vital  importance  and  may 
change  his  whole  views  on  the  market  survey. 

The  tendency  for  competing  companies  to  band  together  is 
a  matter  of  parallel  importance  to  the  movement  toward  integra- 
tion. This  impulse  to  combine  for  better  operating  efficiency 
and  greater  profits  has  been  a  matter  of  worry  to  successive 
legislatures  and  administrations.  Many  of  our  large  corporations 
are  the  results  of  combination.  The  United  Drug  Co.  is  an 
association  of  druggists,  the  United  Shoe  Machinery  Co.  of  shoe 
machinery  manufacturers,  and  many  other  examples  will  come 
to  mind. 

The  surveyor  will  observe  that  in  new  industries,  in  which 
supply  has  not  yet  caught  up  with  demand,  there  is  a  wide 
variety  of  producing  companies.  As  the  original  market  limits 
are  approached,  the  stronger  companies  absorb  the  weaker  ones. 
It  is  a  true  case  of  survival  of  the  fittest.  As  an  instance,  see  Fig. 
29,  which  illustrates  the  tendency  in  the  match  industry.  There 
were  75  manufacturers  of  matches  in  1869,  27  in  1889,  and  20  in 
1914.  Another  example  is  the  motor  truck  industry  where  the 
process  of  combination  has  made  much  headway. 

If  the  industry  shows  a  tendency  towards  combination,  the 
small  company  is  apt  to  be  at  a  disadvantage.  It  cannot  pur- 
chase in  such  large  quantities,  it  cannot  sell  over  so  wide  a  ter- 
ritory, nor  can  it  produce  under  ordinary  circumstances  at  so 
low  a  rate  as  its  large  competitors.  It  may,  of  course,  possess 
advantages,  as  the  surveyor  will  find,  which  will  more  than  make 
up  for  these  deficiencies.  It  may  cater  to  a  specialized  luxury 
demand  or  a  style  demand,  and  in  this  case  it  is  quite  conceivable 
that  its  small  size  would  be  a  positive  advantage. 

There  are,  to  be  sure,  some  industries  in  which  the  reverse  of 
this  process  is  taking  place.  Expansion  and  growth  are  so  rapid 
that  companies  spring  up  like  mushrooms.  Chart,  Fig.  30,  relates 
to  industries  in  which  the  number  of  competing  units  is  greatly 


1C6 


MARKET  ANALYSIS 


on  the  increase.     It  Is  doubtful,  however,  whether  there  has  been 
an}''  diminution  in  the  size  of  the  average  component  company. 

The  student  should  also  ascertain  the  number  of  concerns  in 
that  particular  branch  of  the  industry  in  wliich  his  company 
speciaUzes.  In  the  textile  industry,  for  instance,  there  is  much 
variation.  In  the  cotton  industiy  alone,  there  are  thread  mills, 
denim  mills,  canvas  mills,  sheeting  mills,  etc.,  none  of  which 
is  in  active  competition  with  the  others.    Whereas  all  the  cotton 


oy 

/ 

70 
60 
50 
40 
30 
20 

10 
n 

/ 

k 

\ 

\ 

Fig.  29. — Chart  Illustrating  Tendency  towards  Combination  in  an  Industry. 


mills  purchase  practically  the  same  raw  materials,  the  finished 
products  go  to  different  markets.  From  the  number  of  firms, 
taken  over  a  period  of  years,  can  be  seen  the  tendency  to  combina- 
tion or  dispersion.  From  the  number  of  large  firms  and  the  num- 
ber of  small  firms,  can  be  gathered  information  relative  to  the 
average  size  of  the  prosperous  company. 

A  study  of  such  tendencies,  coupled  with  a  thorough  under- 
standing of  its  internal  affairs,  may  warrant  the  surveyor's  mak- 
ing such  sweeping  recommendations  as  that  of  selling  the  com- 


THE  INDUSTRY  IN  GENERAL 


167 


pany,  or  of  buying  up  some  competitor,  or  even  of  actual  dis- 
solution. 

There  are  undoubtedly  cases  where  it  would  be  wiser  for  a 
company  to  sell  out  to  a  competitor  and  liquidate  entirely.  A 
market  survey  which  brought  such  a  thing  to  pass  might  pay 
for  itself  a  thousand  fold.     Of  course,  few  companies  find  them- 


PROPRIETARY  MEDICINES 


INCREASE  IN  NUMBER  OF 

MANUFACTURERS 
I«49  TO  1914  INCLUSIVE 


1849  ^  MfT.. 


"^'IHm^. 


PERFUMERY 

AND 

COSMETICS 

INCREASE  IN 
NUMBER  OF 
MANUFACTURERS 
1S49  TO  1914 
INCLUSIVE 


69 


1S14 


Fig.  30. — Charts  showing  Exjiansion  in  Cosmetics  and  Proprietary  Medicine 
Industries.     (J.  H.  Cross  Advertising  Agency.) 


selves  in  a  position  where  it  is  advisable  for  them  to  sell  out. 
Frequently,  however,  those  companies  which  make  surveys  are 
those  companies  which  have  been  driven  to  it  by  some  economic 
necessity. 

Strictly  speaking,  such  recommendations  may  not  fall  within  the 
confines  of  a  market  survey,  and  they  should  not  be  advanced  too 
rashly.  Still,  the  man  who  is  far-seeing  enough  to  analyze  potential 
markets  has  a  vision  which  the  executives  cannot  afford  to  ignore. 


168  MARKET  ANALYSIS 

Allied  Industries.  One  criticism  which  is  often  made  against 
extended  study  of  the  industry  in  general  is  that  the  surveyor  is 
not  "  keeping  his  feet  on  the  ground,"  and  that  he  is  wandering 
far  afield.  This  criticism  is  often  a  just  one.  Nevertheless,  it 
is  essential  that  he  have  at  least  a  general  idea  of  the  great  economic 
sea  upon  which  floats  the  bark  he  is  helping  to  pilot.  He  ought, 
accordingly,  to  give  some  attention  to  allied  industries.  Markets 
for  different  commodities,  as  he  will  find,  have  a  relation  to  each 
other.  For  example,  building  activity,  when  restricted,  results 
in  a  corresponding  restriction  in  all  the  industries  dependent  upon 
building  for  their  prosperity.  Not  only  the  market  for  lumber, 
bricks,  cement,  and  other  raw  materials  is  affected,  but  also  tlie 
hardware  manufacturers,  electrical  equipment  makers,  etc.  The 
influence  does  not  stop  here,  but  also  has  a  bearing  on  the  market 
for  new  furniture,  stoves,  and  other  household  goods. 

The  degree  of  correlation  existing  between  industries  may 
help  the  surveyor  to  determine  the  relative  independence  in  his 
industry  of  conditions  in  others.  For  example,  if  the  market 
for  furniture  did  not  fall  off  proportionately  with  the  market  for 
furnaces,  then  building  activity  would  not  be  so  good  an  index 
for  furniture  as  for  furnaces. 

The  surveyor  will  find  it  impossible  to  extend  his  investigation 
to  cover  all  industries  which  affect  or  are  affected  by  his  industry. 
It  will  be  sufficient  for  him  to  take  into  consideration  only  the 
vital  ones. 

Domestic  vs.  Foreign  Industries.  A  thorough  understanding 
of  a  business  often  presupposes  a  knowledge  of  foreign  conditions. 
There  are  some  businesses  which  are  confined  mainly  to  certain 
countries,  for  climatic,  geographical,  or  other  reasons,  such  as  the 
diamond  mines  of  South  Africa  and  the  silk  worm  industry  of 
Japan.  If  the  surveyor  had  under  investigation  the  making  of 
jewelry  or  the  weaving  of  silk,  he  would  have  to  devote  some  time 
to  the  study  of  foreign  sources  of  supply  of  his  raw  materials,  the 
geographical  source,  the  available  suppUes,  the  freight  rates,  insur- 
ance, the  tariff,  etc. 

More  important,  perhaps,  is  a  study  of  how  the  particular 
industry  he  is  investigating  is  conducted  abroad,  and  if  his  time 
and  resources  permit,  he  should  find  such  researches  illuminating. 
For  instance,  the  fabrication  of  akmiinum  is  quite  different  in 


THE  INDUSTRY  IN  GENERAL  169 

Europe  from  what  it  is  in  this  country.  In  Europe,  many  fine 
gravity-poured  castings  are  made  from  aluminum  in  metalHc 
molds,  some  of  which  are  veiy  intricate,  and  the  art  has  pro- 
gressed further  there  than  it  has  here.  In  fact,  aluminum  cast- 
ings made  in  permanent  molds  are  cheaper  than  sand  castings 
in  Europe.  This  is  just  the  reverse  of  the  state  of  affairs  in  this 
country,  largely  because  the  labor  there  is  cheaper  and  more 
highly  skilled.  Europeans  can  make  the  dies  at  a  price  which 
would  be  prohibitive  in  this  country. 

It  is  ordinarily  unsafe  to  transport  a  method  of  manufacture  used 
in  one  place  to  another  without  most  careful  investigation.  Never- 
theless, it  is  quite  likely  for  a  foreign  process  to  develop  to  a  point 
where  it  can  be  taken  over  and  applied  to  American  requirements 
with  great  benefit.  In  this  event,  an  understanding  of  how  the 
industry  is  conducted  in  other  countries  may  be  of  inestimable 
advantage. 

Localization.  The  same  factors  which  frequently  make  it 
important  to  study  certain  foreign  industries  are  also  present  in  a 
consideration  of  the  company's  location.  Everyone  has  noticed 
the  tendency  of  certain  industries  to  become  localized  in  par- 
ticular places.  This  tendency  is  usually  of  long  standing.  The 
surveyor  ought  to  consider  the  factors  which  make  these  localities 
particularly  favorable  for  any  given  industry.  We  know  that 
Pittsburgh  is  the  steel  center  because  of  its  proximity  to  the  coal 
fields.  We  know  that  Paterson  is  the  center  of  the  silk  industry 
because  the  waters  of  the  Passaic  river  are  more  than  ordinarily 
soft.  We  know  that  New  Bedford  became  a  cotton  manufactur- 
ing center,  because  its  nearness  to  the  sea  served  to  give  it  the 
humidity  necessary  for  easy  spinning  of  the  cotton  fibres.  Per- 
haps the  surveyor  would  have  more  difficulty  in  ascertaining  why 
Niirnberg  or  Winchendon  were  toy  towns,  or  Hartford  the  focus 
of  the  insurance  industry,  or  Troy  the  leader  in  collar  manufac- 
tures. Raw  material,  fuel,  labor,  transportation  facilities,  the 
market,  or  mere  force  of  circumstance — any  or  all  of  these  factors 
may  play  a  part. 

This  general  subject  is  closely  aUied  to  that  discussed  under 
"Combination  and  Integration."  Conditions  which  tend  to 
concentration  of  industries  are  constantly  changing.  The  process 
is  slow,  but  when  the  factors  change  which  originally  produced 


170 


MARKET  ANALYSIS 


concentration,  then  the  industiy  must  obey  the  economic  laws 
affecting  it.  The  abandoned  mining  cities  of  the  West  are  drastic 
examples  of  what  resulted  when  suddenly  the  reasons  for  concen- 
tration ceased  to  exist.  The  movement  of  the  cotton  mills 
towards  the  South  is  another  example  of  a  change  of  focus,  as 
see  Fig.  31,  As  shown  there,  nearness  to  source  of  supply  is 
overcoming  the  inertia  of  a  long-established  industry',  with  mod- 
em equipment,  trained  labor,  and  excellent  shipping  facilities. 

THE  MOVEMENT  OF  THE  COTTON  INDUSTRY    FROM  NORTH 

TO  SOUTH 


Spindleage 


North 

South 

1900 

1919 

Increase 

13,171,377 

18,065,857 

37% 

4,367,688 

14,846,239 

240% 

C 

OTTOX    CONSUMP 

TION 

North 

South 

1900 

1919 

Increase 

1,909,498 
2,231.-574 

17% 

1,523,168 
3,491,008 

129% 

Looms 

North 

South 

1899 
1914 

Increase 

3.54,981 

421,641 

19% 

95,701 
251,113 

162% 

Fig.  31. 


THE  INDUSTRY  IN  GENERAL  171 

A  striking  example  of  concentration  is  that  of  the  moving 
picture  industry,  which  of  late  years  has  become  almost  entirely 
confined  to  a  single  state,  for  the  reason  that  this  locality,  on 
account  of  its  topographical  and  atmospheric  conditions,  is  pre- 
eminently suited  to  this  activity.  The  reverse  of  this  condition 
may  be  seen  in  England,  where  conditions  are  so  utterly  unfavor- 
able as  practically  to  preclude  the  success  of  this  industry. 

The  surveyor  ought  to  consider  the  location  of  the  company 
he  is  studying  with  reference  to  the  geographical  grouping  of  the 
industry  in  general.  Is  his  company  situated  advantageously 
or  disadvantageously?  Is  it  in  a  position  to  compete,  or  is  its  market 
more  accessible  from  other  positions?  It  is  quite  possible  that 
breaking  away  from  precedent  and  going  to  another  place  may  be  a 
wise  expedient,  as,  for  example,  a  number  of  Eastern  automotive 
manufacturers  discovered  too  late.  A  little  commercial  research 
might  have  saved  these  organizations  from  extinction. 

Labor  Conditions.  Labor  is  one  of  the  most  important  con- 
siderations, where  the  question  of  location  is  concerned.  Ordi- 
narily, the  investigator  will  find  it  in  large  part  a  local  and  com- 
pany problem,  yet  where  the  industry  is  concentrated  in  any  one 
place  or  several  places,  or  where  it  has  created  a  city  for  itself, 
such  as  Gary,  Illinois,  there  will  be  a  general  labor  situation  for 
industry  and  company  alike. 

Other  germane  questions  are  as  follows:  How  many  people 
are  there  in  the  industry?  Has  the  number  increased  or  decreased? 
How  many  women  or  children  are  there  and  what  is  the  tendency 
in  this  respect?  If  the  number  of  workers  shows  a  decrease,  it  may 
mean  that  great  strides  have  been  made  in  perfecting  the 
machinery  of  production. 

What  is  the  average  wage  of  a  worker  in  this  industry?  How 
does  this  wage  compare  with  that  paid  by  the  company? 

The  industry  in  general  is  a  subject  which  lends  itself  most 
easily  to  graphic  portrayal,  since  the  information  is  usually  so 
detailed  and  profuse.  The  surveyor  gets  away  from  the  particular 
and  specific  problems  peculiar  to  the  company,  and  comes  into 
contact  with  the  much  broader  and  more  vital  problems  which 
affect  the  industry.  It  prevents  him  from  getting  a  one-sided 
impression,  as  he  is  so  apt  to  do  if  he  confines  himself  exclu- 
sively to  the  product  and  the  company.     This  mental  i)anorama 


172  MARKET  ANALYSIS 

of  the  industiy  is  of  value  not  only  to  the  surveyor  but  should  be 
of  greater  interest  to  the  company's  officials,  who  in  many  cases 
are  woefully  ignorant  of  this  matter.  It  is  not  the  usual  thing  to 
find  an  executive  who  is  thoroughly  versed  in  the  industry  of  which 
he  is  a  part. 

Conclusions.  A  study  of  the  industry  in  general  is  important, 
not  onty  on  its  own  account,  but  also  because  of  the  psychological 
effect  upon  the  surveyor  himself.  Even  if  the  data  he  obtains 
are  of  no  immediate  applicable  value,  nevertheless  the  time 
consumed  would  be  warranted  on  account  of  the  breadth  of  view 
thus  secured.  In  spite  of  the  fact  that  he  will  get  a  lot  of  figures, 
notes,  charts,  etc.,  he  should  not  forget  there  are  some  things 
which  can  never  be  charted.     Inspiration  is  one  of  these. 

There  are  many  advantages  in  the  study  of  the  industiy  in 
general.  One  is  that  the  data  are  almost  always  easily  obtained. 
Second,  they  are  usually  in  such  shape  as  to  lend  themselves  to 
graphic  representation,  so  that  general  economic  tendencies  may 
be  sketched  in  broad  strokes.  In  parallelism  with  these  tendencies, 
the  past  and  prospective  growth  and  activities  of  the  company 
may  be  shown. 

The  main  purpose  in  studying  these  trends  is  to  give  an  index 
of  future  development.  The  surveyor  may  obtain  grounds  for 
short-range  predictions  from  a  study  of  the  company  or  the 
product.  But  a  study  of  the  industry  will  assist  in  giving  him 
material  upon  which  to  base  long-range  forecasts. 

Indeed,  a  study  of  the  industry  will  rarely  result  in  any  imme- 
diate profit.  On  the  other  hand,  for  far-sighted  survey  purposes, 
a  thorough  understanding  should  be  had  of  the  activities  which 
lie  beyond  the  company's  threshold.  Even  in  spite  of  his  con- 
viction that  such  research  will  be  of  no  immediate  advantage,  the 
surveyor  should  devote  ample  time  to  it,  for  there  is  no  telling 
where  he  may  discover  some  little  ray  of  light,  indicating  an  open- 
ing which,  when  enlarged,  becomes  the  door  of  opportunity. 


CHAPTER  XI 
COMPETITION 

Outline 
What  is  the  existing  character  of  competition? 

(a)  Is  there  cut-throat  competition? 

(b)  Is  there  a  tendency  towards  cooperation? 

What  determines  the  degree  of  monopoly  existing  in  the  industry? 

Is  it  caused  by 

(a)  Raw  materials? 

(6)   Process  of  manufacture? 

(c)  Distributing  methods? 

(d)  Style? 

(e)  Advertising? 
(/)   Patent? 

What  is  the  basis  of  competition  for  the  company?   Is  it 
(o)  Price? 

(1)  How  much  luxury  demand  is  present? 

(2)  Do  substitutes  cause  price  changes? 

(3)  How  is  price  maintained  and  how  prevalent  is  underselling? 

(4)  Is  price  fixed  by  habit,  by  company  dictum,  or  by  trade  demand? 

(5)  What  are  the  prices  of  competing  products  and  how  do  they 
compare  with  the  company's  price? 

(b)  Size. 

(1)  How  does  size  affect  the  company's  position  among  competitors? 

(c)  Location. 

(1)  Is  it  advantageous  or  disadvantageous? 

(a)  Is  it  situated  among  similar  industries? 

(b)  Is  it  by  itself? 

(2)  Should  a  retail  store  be  on  a  corner? 

(3)  Should  a  factory  be  in  city  or  country?  etc. 

(d)  Line  of  goods. 

(1)  How  many  competitors  are  apparent  and  not  real,  due  to 
(a)  Different  sales  appeal. 
(6)  Non-conflicting  sales  territories. 

(e)  The  number  of  companies  in  the  industry. 

173 


174  MARKET  ANALYSIS 


(J)  Service. 

(1)  What  is  the  company's  service  problem? 

(a)  Is  it  delivery? 

(6)  Is  it  repair  service? 

(c)   Is  it  instruction? 
{g)  Labor. 

(1)  Is  it  contented? 

(2)  What  is  the  rate  of  pay?  etc. 
{h)  Transportation. 

(t)    Brand. 

(1)  Is  the  company's  brand  satisfactory? 
0")   Goodwill. 

(1)  What  is  the  value  of  the  company's  goodwill? 

(2)  Is  it  decreasing  or  increasing,  and  what  methods  are  used  to 
improve  it? 

(3)  How  does  goodwill  compare  with  competitor's  goodwill? 
(/c)  Personality  of  the  executive. 

(1)  How  much  of  the  company's  success  is  due  to  the  character  and 
achievements  of  the  executive? 
(I)    Patents. 

Are  there  other  aspects  of  competition? 

(a)  Is  there  competition  between  various  sections  of  the  country? 

(b)  Are  there  dissimilar  products  in  existence  which  serve  the  same  purpose? 

(c)  How  is  the  company  affected  by  chain  store  competition? 

(d)  Do  mail  order  houses  compete  to  any  great  extent? 

What  would  be  the  cost  of  overcoming  competition? 
(o)  Would  it  be  worth  while? 
(b)  Is  there  not  some  easier  way? 

What  competition  is  there  with  foreign  countries? 

(a)  With  foreign  goods  imported  from  abroad  to  this  country? 

(b)  In  foreign  countries  with  foreign  goods? 

(c)  In  foreign  countries  with  other  American  goods? 

(d)  With  foreign  goods  in  this  country? 

Would  combination  with  competitors  be  advantageous? 


CHAPTER  XI 
COMPETITION 

The  value  of  any  study  of  competition  is  dependent  on  the  abil- 
ity of  the  investigator  to  extract  the  information.  The  facts  of 
most  importance  are  naturally  not  those  of  common  knowledge. 
It  will  try  the  surveyor's  ingenuity  to  devise  means  of  coming 
at  this  information  in  a  legitimate  way. 

It  is  surprising  to  find  the  amount  of  ignorance  existing  in  many 
companies  about  competitors.  What  they  do  know  is  accidental, 
and  has  come  to  them  naturally  rather  than  been  sought  for. 
Much  of  their  information  is  hearsay,  unsupported  by  evidence 
other  than  salesmen's  gossip.  The  names  of  the  larger  competi- 
tors are  known,  something  about  what  they  make,  perhaps  a 
little  concerning  their  merchandising  methods.  In  the  majority 
of  instances  no  attempt  has  been  made  to  collect  these  data  for 
conunercial  use. 

Theoretically,  everything  about  a  competitor  should  be  of 
interest  to  the  surveyor,  his  size,  faciUties  for  production,  his 
product,  his  purchasing  and  sales  methods,  and  the  price  charged 
to  his  customers.  Actually,  the  surveyor  will  be  limited  to  finding 
out  the  salient  points  about  the  principal  competitors,  unless  it  is 
intended  to  make  a  special  point  of  this  phase  of  the  survey  work. 

The  Sources  of  Information.  If  access  could  be  had  to  all  the 
information  in  the  power  of  competitors  to  give,  it  would  simphfy 
the  surveyor's  task.  As  this  obviously  is  out  of  the  question,  he 
must  seek  the  information  where  he  can  get  it.  The  following 
are  suggestive  of  possible  sources: 

(1)  Catalogues  and  Samples.  A  great  many  companies  publish 
complete  catalogues  with  price  lists  of  their  products,  which  are 
readily  available  for  study.  Through  them  it  is  possible  to  obtain 
general  information  about  the  various  lines  put  out  by  competitors, 
the  materials  of  construction,  and  to  a  considerable  degree  the 
paethod  of  manufacture.     As  the  majority  of  catalogues  are  illus- 

175 


176  MARKET  ANALYSIS 

trated,  the  surveyor  is  enabled  to  get  a  clear  conception  of  the 
appearance  of  the  competing  articles.  This  literature  not  infre- 
quently describes  their  method  of  doing  business,  describes  their 
plant,  discusses  the  industry,  or  gives  other  valuable  pointers. 

A  collection  of  samples  of  competitive  products  should  be 
made  whenever  possible,  and  their  main  points  described  by  the 
investigator  in  his  report. 

(2)  Customers.  It  is  possible,  and  in  fact  desirable,  to  inter- 
view some  of  the  accessible  customers  of  the  most  important 
competitors.  The  surveyor  is,  of  course,  apt  to  find  that  these 
same  people  are  also  customers  of  his  own  company.  From  them 
he  should  obtain  information  as  to  sales  methods,  merit  of  product, 
etc.,  and  why,  in  general,  the  customers  give  them  their  trade. 

(3)  Information  Departments.  Many  of  the  larger  newspapers 
have  departments  which  furnish  their  advertisers  information  as 
to  the  markets  in  their  district,  in  relation  to  competitive  products. 
The  same  is  true  of  the  larger  advertising  agencies,  which  also 
have  services  of  this  kind  for  the  benefit  of  their  clients.  Trade 
associations  are  often  in  possession  of  valuable  data  on  the  subject 
which  are  available  to  members.  Trade  papers  have  the  same 
service.  Also  the  Chambers  of  Commerce  in  the  various  cities 
can  often  be  of  assistance. 

(4)  The  Competitor  Himself.  Twenty  years  ago,  a  company 
probably  would  have  refused  point  blank  to  divulge  any  infor- 
mation about  itself  to  a  competitor.  Today,  it  may  take  the 
visitor  through  the  plant.  In  certain  cases  it  may  be  advisable 
for  the  surveyor  to  make  application  in  person  to  the  competitor. 
In  that  event  it  may  be  well  to  present  one's  self  at  the  competi- 
tor's office  without  having  previously  announced  an  intention  of 
calling.  This  makes  it  more  difficult  for  him  to  refuse  admit- 
tance. In  interviews  of  this  nature,  the  surveyor  should  show 
his  willingness  to  impart  information,  and  should  open  the  con- 
versation by  stating  his  desire  to  render  service.  Information  of 
marked  value  may  sometimes  be  obtained  from  the  competitors 
themselves,  in  return  for  a  promise  to  give  them  the  benefit  of 
the  surveyor's  discoveries  along  certain  lines. 

The  Character  of  Competition.  The  surveyor  wiU  find  that  the 
character  of  competition  in  different  industries  varies  considerably. 
Generally  speaking,   "  cut-throat  competition  "   is  going  out  of 


COMPETITION  177 

vogue.  Companies  have  begun  to  realize  that  their  own  ideas 
are  not  sufficient,  however  valuable  they  may  be.  They  also 
realize  that,  if  they  are  to  obtain  the  benefit  of  their  competitors' 
ideas,  they  must  give  their  own  in  return. 

This  tendency  among  competitors  to  cooperate  is  indicated 
by  the  growth  of  the  various  trade  associations,  such  as  the 
National  Automobile  Chamber  of  Commerce,  the  National 
Canners'  Association,  the  Hardware  Dealers'  Association,  etc. 
In  following  out  this  trend,  business  is  only  imitating  the  example  of 
the  medical  profession  and  the  sciences,  which  have  long  realized  the 
value  of  exchanging  information.  This  growing  feeling  of  friendli- 
ness among  competitors  is  fostered  by  the  various  trade  papers. 

It  is  important  for  the  surveyor  to  find  out  what  liaison  arrange- 
ments exist  between  his  particular  company  and  its  competitors, 
as  well  as  the  prospect  for  extending  these  relations.  It  will  not 
only  prove  of  direct  importance  in  the  marketing  problem,  but  it 
may  prove  to  have  a  direct  bearing  on  his  own  work.  He  may 
find  that  many  of  the  other  companies'  records  are  open  to  him. 
Bankers  and  brokers,  for  instance,  are  usually  willing  to  give  each 
other  information  concerning  various  securities.  In  this  way, 
a  man  is  able  to  get  information  which  would  be  exceedingly 
difficult  and  expensive  for  him  to  obtain  by  any  other  method. 

Competition  vs.  Monopoly.  A  further  step  is  to  determine 
the  degree  of  competition  which  prevails.  This  is  one  of  those 
cases  where  it  is  the  surveyor's  task  to  find  out  what  state  of 
affairs  exists  in  his  particular  industry,  and  to  orient  his  company 
in  that  field.  Some  industries  are  highly  competitive;  a  few  are 
monopolistic,  but  most  occupy  varying  degrees  between  these 
two  extremes. 

In  ascertaining  the  degree  to  which  monopoly  exists  in  the 
company  and  in  the  industry,  the  surveyor  may  obtain  some 
suggestions  from  the  following  classification: 

(1)  Raw  Materials.  The  sources  of  supply  from  which  com- 
peting companies  get  their  raw  materials  allow  the  surveyor  to 
draw  some  inferences  as  to  the  monopolistic  element  present. 
Large  monopohes,  such  as  the  Aluminum  Company  of  America, 
are  likely  to  control  sources  of  supply. 

(2)  Process  of  Manufacture.  Operating  efficiency  will  often 
enable  one  company  to  secure  a  virtual  monopoly  in  its  field. 


ITS  MARKET  ANALYSIS 

This  may  have  been  obtained  through  the  energy  and  abiUty 
of  the  executives  or  may  have  been  acquired  through  develop- 
ment while  under  patent  protection.  The  Ford  automobile  has  a 
virtual  monopoly  on  the  low-priced  car,  while  the  Dennison 
ISIfg.  Co.  takes  the  lead  in  the  tag  and  sticker  field  by  means 
of  its  specially  developed  automatic  machineiy. 

(3)  Distributing  Methods.  If  a  company  has  an  unusually 
well-developed  system  of  distribution,  this  is  one  of  the  surest 
ways  of  holding  the  field  against  competitors.  The  United  Cigar 
Stores  are  an  example  of  a  selling  organization  for  cigars  and 
tobacco  which  has  tended  to  monopolize  the  retail  sale  of  tobacco 
in  many  districts. 

(4)  Style.  To  a  great  extent  the  style  of  the  article  may 
determine  the  degree  of  monopoly.  In  the  automobile  field,  for 
instance,  the  Pierce-Arrow  car  has  aimed  to  stand  preeminent  in 
the  high-price  trade. 

(5)  Advertising.  Advertising  is  a  great  factor  in  competition 
and  the  articles  are  numberless  the  hold  of  which  on  the  pubhc 
has  largely  been  obtained  through  this  source.  The  media  through 
which  competitors  advertise  are  important  in  this  connection. 

(6)  Patents.  A  patent  forms,  in  some  cases,  a  true  monopoly. 
It  is  protected  by  legislative  enactment  against  competition. 
This  is  true  of  the  Schrader  valve  for  automobile  tires.  It  is  also 
true  of  many  patented  processes  which  virtually  give  the  manu- 
facturing company  or  companies  a  monopoly,  for  instance,  the 
Alumimmi  Castings  Company,  which  controls  in  this  country 
the  Cothias  patents  for  casting  aluminum  in  open  metal  molds. 

There  are,  of  course,  other  influences  making  for  monopoly. 
The  copyright  law  is  one.  Then  there  are  special  government 
dispensations  to  some  companies,  such  as  franchises  under  which 
railroad  companies  operate,  bank  note  concerns  which  manufac- 
ture currency  and  stamps,  etc. 

Under  each  of  these  headings  the  surveyor  should  consider 
wherein  its  principle  affects  his  company's  problem,  whether  any 
attempt  in  the  direction  of  greater  monopoly  is  desirable,  how 
expensive  such  control  would  be,  etc. 

The  Bases  of  Competition.  There  are  certain  fundamental 
factors  of  competition  common  to  the  manufacturer,  the  middle- 
man and  the  retailer  alike,  although  appearing  under  somewhat 


COMPETITION  179 

different  aspects.  The  surveyor  should  treat  each  of  these  prob- 
lems. Certain  ones  recur  in  every  industiy;  some  are  peculiar 
to  a  few  industries.  In  competition,  as  in  other  fields,  no  two 
companies  have  exactly  the  same  problem.  By  analyzing  the 
differences,  the  surveyor  may  group  competitors  into  those  wliich 
come  closest  and  those  which  are  scarcely  competitors  at  all. 

The  principal  bases  of  competition  are  as  follows: 

(1)  Price.  What  has  price  to  do  with  selling  this  article?  In 
what  way  does  it  give  an  advantage  over  competitors  by  being 
higher  or  lower?  Price  is  so  inextricably  tangled  with  every 
marketing  problem,  and  in  such  individual  ways,  that  nothing 
more  than  suggestions  can  be  given  here  as  to  the  surveyor's 
method  of  attack.  As  a  rule,  the  more  luxury  demand  present, 
the  less  importance  is  attached  to  the  price  factor,  since  style  and 
not  price  is  the  deteminant  there.  A  company  having  a  mo- 
nopoly of  the  field  can  charge  its  own  price,  but,  on  the  other  hand, 
if  this  price  is  considered  too  high  by  the  purchasers,  the  market 
will  be  strictly  limited,  as  in  the  case  of  certain  household  refriger- 
ating systems.  Or,  if  the  article  is  badly  needed,  there  will  be 
substitutes.  Price,  as  everyone  knows,  has  a  great  deal  to  do  with 
selling  the  article,  whether  it  is  fixed  by  competition  or  whether 
determined  by  the  company  itself. 

Manufacturer,  jobber,  and  dealer  have  to  face  the  problems 
of  price  maintenance  and  of  underselling.  To  test  out  this  tend- 
ency, the  surveyor  should  attempt  to  ascertain  the  exact  prices 
charged  by  competitors  to  jobbers,  retailers,  and  consumers,  and 
the  profits  made  by  each  concern,  or  group  of  concerns  in  the  chain 
of  distribution.  Ordinarily,  manufacturers  are  in  favor  of  a 
fixed  price  maintained  by  reason  of  patent  rights,  by  contract 
with  dealer  for  consideration,  or  simply  through  a  ''  gentlemen's 
agreement."  There  are  always  dealers  who  wish  to  cut  prices  of 
standard  articles  to  attract  trade,  and  those  who  wish  to  conduct 
closing-out  and  end-of-thc-season  sales.  There  are,  in  addition, 
dealers  who  make  a  practice  of  cutting  prices  on  everything  pos- 
sible, claiming  that  their  particular  economies  allow  them  to 
follow  this  practice. 

In  some  hnes,  price  is  fairly  well  fixed  by  habit  or  custom. 
Thus,  chewing  gum  sells  for  five  cents  a  package  and  peanuts  for 
five  cents  a  bag. 


18G  MARKET  ANALYSIS 

It  has  been  pointed  out  that  a  fixed  price  lays  the  manu- 
facturer open  to  competition.  That  is,  competitors  can  figure 
out  their  own  costs  in  relation  to  this  price  and  act  accordingl5\ 
Fin-thermore,  the  manufacturer  has  constantly  to  be  thinking  of 
improving  the  product  and  giving  the  customer  more  for  his  money. 

"  In  the  wholesale  markets/'  as  John  Stuart  Mill  says,  "  it 
is  true  as  a  general  proposition  that  there  are  not  two  prices  at 
one  time  for  the  same  thing."  The  surveyor  will  notice  the 
truth  of  this  statement,  that  competition  fixes  wholesale  prices 
much  more  rigidly  than  retail  prices,  which  in  comparison  are 
slow  to  feel  the  effect  of  competition. 

(2)  Size.  The  size  of  the  concern  is  an  important  element 
in  competition.  Generally  speaking,  the  larger  manufacturers, 
jobbers,  and  retailers  have  certain  advantages  over  their  smaller 
competitors,  particularly  in  staple  lines.  The  problem  of  dis- 
tribution may  be  simpler  for  the  larger  companies,  as  may  be  also 
production  efficiency. 

In  studying  competitors,  the  surveyor  will  perceive  that  the 
problems  of  his  company  doubtless  will  be  most  akin  to  those  of 
companies  of  a  similar  size.  Sales  and  manufacturing  problems 
are  very  likely  to  be  similar,  distribution  difficulties  ahke,  etc. 
Smaller  companies  will  be  busied  with  local  problems;  larger 
companies  will  be  able  to  effect  economies  impossible  for  them. 

Size  for  the  retailer  is  almost  always  an  advantage,  as  long 
as  the  local  market  is  large  enough  to  take  care  of  the  overhead. 
It  enables  him  to  carrj^  in  stock  an  extensive  line  of  goods  from  a 
wide  variety  of  sources;  it  allows  him  to  do  business  in  an  attrac- 
tive manner;  turnover  of  goods  is  quicker  as  volume  of  business 
increases;   he  can  advertise  on  a  large  scale,  etc. 

(3)  Location.  Where  is  the  company  situated  in  comparison 
with  its  competitors?  Is  its  location  advantageous  or  disadvan- 
tageous? It  is  hard  for  a  company  to  compete  if  it  is  not  well 
situated,  both  in  respect  to  its  market,  and  in  respect  to  its  raw 
materials.  As  has  been  pointed  out,  industries  of  similar  nature 
tend  to  become  concentrated  in  certain  cities.  Lynn  is  a  shoe 
center,  Akron  a  rubber  center.  Providence  a  cheap-jewelry  center, 
etc.  Buyers  of  these  articles  naturally  go  where  there  are  the 
most  sellers  and  thus  the  isolated  manufacturer  is  at  a  dis- 
advantage. 


COMPETITION  181 

The  problem  of  the  dealer  and  retailer  in  regard  to  location 
is  somewhat  different.  Location  is  all  important.  It  is  in  many 
ways  an  advantage  for  large  department  stores  to  be  near  each 
other,  partly  because  it  makes  it  easier  for  women  to  shop  in  them. 
But  it  would  be  a  serious  disadvantage  to  have  three  drug  stores 
on  the  same  block.  In  most  cases,  the  surveyor  will  find  that  the 
location  depends  for  its  advantage  on  the  clientele  it  expects  to 
reach.  For  instance,  automobile  accessory  jobbers  are  apt  to  be 
grouped  together  for  convenience  of  the  buyers,  and  the  same  is 
true  of  leather,  cotton,  and  wool  wholesalers. 

The  habit  of  grouping  crafts  and  industries  in  one  locality 
descends  from  the  middle  ages  when  the  guilds  congregated 
together.  Many  retailers  now  find  it  expedient  to  locate  away 
from  their  competitors.  If  the  surveyor  is  confronted  with  such 
a  question  he  should  ask  himself  if  this  is  to  the  best  advantage 
of  the  retailer.  Should  the  store  be  located  on  the  main  thorough- 
fare or  on  a  side  street  where  rents  and  expenses  are  lower?  Should 
it  be  on  the  ground  floor,  or  will  the  second,  third,  or  even  twentieth 
do  equally  as  well?  Should  it  be  on  a  corner,  as  the  United  Cigar 
Stores  are  apt  to  be?  All  these  questions  are  a  part  of  com- 
mercial research,  and  have  a  bearing  upon  market  analysis. 

(4)  Line  of  Goods.  Competitors  often  differ  widely  in  the 
lines  of  goods  offered  for  sale.  The  surveyor  will  find  it  valuable 
to  ascertain  how  many  and  what  lines  the  chief  competitors  cany, 
and,  if  possible,  which  are  the  most  successful  sellers. 

Manufacturers  may  be  apparent  competitors,  yet  actually 
not  so  at  all.  For  example,  the  territorial  scope  of  their  market 
may  be  absolutely  separate.  Many  producers  on  the  Pacific 
Coast  are  not  in  competition  with  those  on  the  Atlantic  Coast, 
because  the  freight  rates  preclude  the  overlapping  of  their  terri- 
tories. Again,  the  appeal  may  be  to  different  classes  of  purchasers. 
The  maker  of  cotton  hosiery  conflicts  but  little  with  the  maker 
of  silk  hosiery,  because  the  class  of  purchaser  is  different. 

For  the  retailer,  it  is  usually  desirable  to  stock  a  fairly  com- 
plete line  of  goods.  Purchasers  do  not  like  to  go  to  a  store  and 
find  that  it  docs  not  cany  what  they  wish.  The  sui-veyor  should 
endeavor  to  get  a  line  on  the  completeness  of  the  stock,  and  also 
the  rate  of  turnover.  He  should  here  as  elsewhere,  however,  be 
on  the  lookout  for  exceptions  to  the  rule.     Some  retailers  have 


182  MARKET  ANALYSIS 

made  successes  by  carrying  only  a  single  line.     Restaurants  have 
proved  profitable  which  served  nothing  but  doughnuts  and  coffee. 

(5)  Number.  The  number  of  companies  which  an  industry 
will  comfortably  support  varies  from  one  to  many  thousand. 
The  actual  number  of  manufacturers,  for  instance,  docs  not  tell 
anything  about  the  status  of  competition  in  that  industry.  The 
surveyor  must  look  further  than  this.  For  instance,  the  business 
may  be  highly  competitive  and  yet  have  veiy  few  companies  in 
the  field.  In  the  phonograph  industry,  there  are  not  more  than 
a  half  dozen  dominant  companies,  two  of  which  have  a  large  share 
of  the  trade. 

(6)  Service.  Few  articles,  the  surveyor  will  find,  are  sold 
exclusively  on  merit  or  style.  The  element  of  service  usually 
enters.  Service  may  play  a  very  important  part  in  a  company's 
hold  of  the  market.  In  merchandising  tractors  the  distributor 
must  furnish  adequate  repair  service.  At  the  plowing  period, 
when  every  minute  counts,  if  a  breakdown  occurs,  the  judgment 
of  the  whole  community  in  regard  to  the  tractor  may  depend  on 
the  speed  with  which  repairs  are  effected.  The  automobile  dealer 
is  better  equipped  for  this  service  than  the  implement  dealer,  and 
this  advantage  alone  may  be  sufl&cient  to  give  him  a  preferential 
standing. 

The  cost  service  varies  with  the  product  and  the  use  for  which 
the  product  is  intended.  This  is  graphically  shown  in  Fig.  32, 
which  indicates  the  expense  of  cartage  in  various  lines  of  business. 
The  service  may  be  a  delivery  system,  as  in  the  case  of  many 
retailers;  it  may  lie  in  prompt  attention  to  complaints;  in  readi- 
ness to  listen  to  and  adopt  suggestions;  in  helping  dealers  mer- 
chandise their  products,  etc.  The  surveyor  should  notice  what 
services  competitors  offer,  and  should  watch  for  signs  of  appre- 
ciation of  these  services  among  the  competitors'  customers. 

(7)  Labor.  The  labor  problem  is  a  very  definite  one  in  com- 
petition. Contented  labor  is  a  great  asset.  Strikes  are  costly 
and  result  in  ill-feeling  on  both  sides.  The  surveyor  should 
observe  the  class  of  labor  employed  by  the  company's  competi- 
tors, and  compare  the  rates  of  pay  with  those  of  his  client.  Such 
studies  of  labor  may  reveal  many  interesting  sidelights.  It 
may  appear  that  city  labor  is  inferior  to  country  labor,  for  example. 
In  one  case,  where  an  electrical  manufacturer  had  a  plant  in  the 


COMPETITION  183 

city  and  another  in  the  country  doing  the  same  line  of  work,  the 
country  plant  was  run  much  more  efficiently  and  on  a  cheaper 
basis  than  the  one  in  the  city,  mainly  because  the  workmen  were 
more  efficient. 

(8)  Trans-portation.  Transportation  exercises  a  very  real 
limiting  influence  on  business.  It  may  make  distance  a  factor 
of  Httle  importance,  as  the  installation  of  refrigerator  express 
lines  did  for  the  fruit  trade  of  Florida  and  Cahfornia,  or  it  may 
be  an  efficient  barrier  to  expansion  where  the  article  is  bulky. 


r 

!               ICE  45.6% 

1 

c 

(                        SOFT  DRINKS    20.2% 

L            _}                          BRICK         19.9% 

1-.               1                        BAKERIES       19.6%                | 

[^            1                            LAUNDRIES     15.5%                 | 

1                           COAL  &  WOOD  15.2% 

C 

f                             ICECREAM     14.9% 

1           1                      DAIRY  PRODUCTS    12.1%                  I 

[        1                            BREWERIES         9.2%                 I 

1      1                                  LUMBER            6.8%                  | 

i    1                       GROCERIES  t- MEAT     4.4%           | 

HARDWARE           i.0% 

It                         FURNITURE  £•  CARPETS     2.6%                  | 

fr 

DEPT  STORES.  HATTERS, FURRIERS1-5HOE5   1.5% 

1 

F 

WHOLESALE  MEATS       1. 1  % 

I-J 

Fig.  32. — ChaH  showing  Proportion  of  Delivery  Costs  to  Gross  Sales  in 
Various  Lines.     ("  Chicago  Tribune.") 

In  this  connection,  the  surveyor  may  find  it  valuable  to  investi- 
gate the  means  of  transportation  which  competitors  use.  For 
instance,  competitors  may  have  found  that  the  truck  offered  a 
solution  for  some  of  their  problems,  or  they  might  ship  to  an 
assembling  plant  at  some  distance  before  setting  up  the  product 
and  marketing  it.  In  Europe  aerial  transportation  is  already 
becoming  a  competitive  factor.  The  surveyor  must  not  forget 
that  some  seemingly  insignificant  move  on  the  part  of  a  com- 
petitor may  serve  to  establish  a  trend  which  will  one  day  become 
controlling. 


184  MARKET  ANALYSIS 

(9)  Brand.  In  many  industries  it  is  customary  to  sell 
products  under  brand.  The  surveyor  should  aim  to  discover  of 
what  value  this  brand  is  in  competition  and,  if  possible,  to  analyze 
the  various  competing  brands  and  see  if  there  is  anything  intrin- 
sically wrong  with  the  one  used  by  his  company. 

In  Printers'  Ink  there  is  an  interesting  discussion  of  the  possi- 
biUty  of  one  sales  organization  selling  two  directly  competing 
articles  controlled  by  the  same  company.  Examples  are  given 
of  a  typewriter  company  which  purchased  several  competing 
makes  and  attempted  to  market  them  all  through  the  same  sales 
force.  The  consequence  was  that  all  but  the  original  one  dis- 
appeared. The  same  experience  was  undergone  by  a  paint 
company,  a  watch  company,  and  the  maker  of  an  office  device, 
each  of  which  attempted  the  feat  of  having  the  same  salesmen 
sell  two  articles.  In  each  case  it  failed.  The  writer  points  to  the 
General  Motors  Corporations,  with  separate  offices  and  salesmen 
for  their  various  cars,  as  a  successful  example  of  a  company  which 
adopted  the  opposite  policy  of  retaining  the  personnel  and  sales 
force  of  the  purchased  company  intact.  Eastman  Kodak  and 
Standard  Oil  are  other  examples  of  the  same  policy.  This  would 
seem  to  point  to  the  conclusion  that  one  sales  force  cannot  sell 
successfully  two  competing  brands.  Either  the  two  should  be 
combined,  or  sold  separately  with  separate  organizations.  Such 
examples  may  prove  illuminating  to  the  research  man;  but  he  will 
be  well  advised  to  judge  his  own  case  on  its  merits  rather  than 
by  analogy. 

The  brand  is  a  double-edged  weapon,  for  while  it  protects 
the  manufacturer  in  many  ways,  it  also  protects  the  public,  who, 
if  not  caring  for  a  particular  article,  can  easily  avoid  purchasing 
it  again. 

Another  point  for  the  surveyor  to  consider  is  the  ease  with 
which  the  brand  name  may  be  pronounced.  It  has  been  found 
to  be  a  psychological  fact  that  uncertainty  as  to  pronunciation 
of  an  article  will  often  deter  a  purchaser  from  asking  for  a  particu- 
lar brand.  This  explains  the  change  in  spelling  of  some  products, 
such  as  "  Jonteel "  for  the  French  "  Gentil,"  and  "  Sempray 
Jovenay  "  for  the  Itahan  "  Sempre  Giovine."  In  other  cases, 
such  as  "Cliquot  Club  "  and  "  Jaeger,"  the  names  have  been 
respelled  phonetically  in  small  letters  below  the  actual  name. 


COMPETITION  185 

The  surveyor  may  encounter  a  situation  where  a  company 
is  manufacturing  its  products  under  separate  trade  names.  When 
a  large  Hne  of  products  is  put  out,  it  is  manifestly  impossible  to 
give  each  a  great  amount  of  publicity,  and  the  multiplicity  of 
names  is  inclined  to  breed  confusion.  In  many  cases,  it  may 
prove  excellent  policy  to  choose  a  family  name  for  the  company's 
products.  By  advertising  this  one  name  all  the  products  of  the 
company  receive  publicity. 

(10)  Goodwill.  The  surveyor  can  best  measure  the  value  of  the 
brand  or  trade  mark  by  the  goodwill.  Goodwill  may  be  an  almost 
priceless  asset,  as  that  for  "  Ivoiy  "  soap.  Ill  will  may  be  as 
much  a  detriment  to  sales  as  the  motto  "  Made  in  Germany  " 
was  during  the  war.  Goodwill  is  likely  to  increase  with  age, 
and,  if  a  company  with  a  long  record  does  not  have  a  consider- 
able amount  of  it,  there  must  be  something  radically  wrong. 

In  some  cases  goodwill  may  prove  superior  even  to  price  as  a 
drawing  factor,  though  not  in  all  cases.  A  certain  cleanser, 
though  nationally  known  and  distributed,  has  suffered  serious 
loss  through  competition  of  other  cleansers  selling  at  a  lower 
price.  The  name  of  the  product  has  much  to  do  with  goodwill 
since  this  is  the  means  of  identification  in  the  eyes  of  customers. 
It  is  a  dangerous  policy  to  attempt  changing  the  name  of  a  well- 
known  product. 

The  surveyor  will  find  that  goodwill  is  a  most  intangible  fac- 
tor and  ever  changing.  Its  value  lies  wholly  in  the  merit  of  the 
product  in  the  eye  of  the  consumer.  It  may  have  been  built  up 
laboriously  by  years  of  patient  cultivation  and  fair  treatment, 
or  it  may  be  a  mushroom  growth  of  advertising.  Most  good- 
will is  a  combination  of  both.  However  it  is  created,  it  is  there, 
and  the  surveyor  must  deal  with  it  as  one  of  the  very  potent 
factors  of  competition. 

(11)  Personality  of  the  Executive.  No  matter  whether  large 
or  small,  a  company  must  have  a  head,  and,  on  the  ability  of  that 
head  to  conduct  its  affairs,  depends  in  large  degree  the  standing 
of  the  company  among  competitors.  Henry  Ford  made  the  Ford 
Company,  John  M.  Patterson  made  the  National  Cash  Register 
Company,  and  other  examples  will  occur  to  the  surveyor.  What- 
ever methods  were  used,  it  was  the  personality  of  the  man  in 
charge  which  was  largely  responsible.     It  is  important  for  the 


186  MARKET  ANALYSIS 

sun'cyor  to  study  the  personnel  of  competitors  with  this  in 
mind. 

(12)  Patents.  Some  companies,  by  virtue  of  their  patent 
rights,  attain  priority  in  the  field.  This  topic  has  already  been 
treated. 

Other  Aspects.  So  far,  the  direct  factors  of  competition 
have  been  discussed.  But  what  of  the  indirect  factors  of  com- 
petition? There  are  usually  various  semi-competitive  considera- 
tions which  will  crop  up  in  ahuost  every  survey,  and  for  which 
the  investigator  must  be  on  the  alert.  An  example  of  this  indirect 
competition  is  the  railroad  line  which  operates  in  rivalry  with 
steamship  lines.  There  is  navigation  on  rivers  and  canals,  and 
there  are  motor  trucks,  as  well  as  other  railroads.  More  recently, 
we  have  the  very  potent  competition  of  the  automobile  with  the 
street  car. 

Outside  of  the  field  of  public  utihties,  the  surveyor  will  notice 
examples  of  indirect  competition  in  daily  life.  He  will  observe 
the  automatic  gas  lighter  in  competition  with  the  match,  electricity 
ousting  gas  for  illuminating  purposes,  etc.  This  topic  is  closely 
related  to  that  previously  examined,  on  the  superseding  of  a 
product. 

On  the  other  hand,  there  may  be  no  competition  where  it 
appears  to  be  rife.  A  survey  revealed  that,  comparatively 
speaking,  no  women  use  soap  powder  for  both  washing  and  scour- 
ing, but  that  all  women  used  a  scouring  powder,  that  is,  a  cleanser. 

The  engineer  may  not  find  anything  of  this  sort  in  the  prob- 
lem he  is  investigating  but  at  least  he  should  look  carefully  into 
the  possibihties.  The  indirect  factors  of  competition  are  likely 
to  prove  elusive,  but  their  influence  is  none  the  less  important. 

Chain  Stores  and  Mail  Order  Houses.  A  semi-direct  factor 
of  competition  in  many  lines  of  business  is  the  chain  store  and 
the  mail-order  house.  It  is  likely  to  have  its  effect  on  manu- 
facturer, middleman,  and  dealer  ahke.  For  the  manufacturer 
it  may  offer  a  very  convenient  method  of  marketing  part  of  his 
production,  although  he  nms  the  risk  of  incurring  the  enmity 
of  "  legitimate  "  distributors. 

The  chain  store  is  usually  a  price  cutter.  It  can  afford  to 
do  this  on  accomit  of  quantity  purchases,  quick  turnover,  and  a 
central    warehouse    available    for    quick    suppUes.     The    stocks 


COMPETITION  187 

in  manj^  chain  stores  are  turned  over  more  than  once  a  month. 
They  are  also  usually  of  the  "  cash  and  CQ,vYy  "  variety,  thus  elimi- 
nating the  cost  of  delivery  service,  and  cutting  oi¥  a  certain  per- 
centage of  the  price.  Although  chain  stores  may  push  their 
own  brands,  yet  as  a  general  rule  they  carry  as  wide  or  a  wider 
line  of  advertised  goods  than  other  stores. 

The  mail-order  house  illustrates  another  specialized  type  of 
competition.  There  are  two  very  large  houses  in  this  country 
doing  an  exclusive  mail-order  business,  and  many  smaller  ones. 
In  addition  to  this,  many  ordinary  companies  have  mail-order 
departments.  The  surveyor  should  go  into  the  possibility  of 
mail-order  business  for  his  product,  while  studying  the  market.  It 
affords  a  convenient,  cheap,  and  rapid  method  of  canvassing  ter- 
ritory, particularly  rural  communities. 

Mail-order  houses  sell  practically  everything  and  the  pur- 
chaser has  the  opportunity  to  do  aU  his  ordering  from  one  house 
(hrough  one  catalogue.  The  surveyor  should  ascertain  whether 
his  own  company  should  establish  a  mail-order  department,  and, 
if  so,  what  the  reaction  of  the  distributors  would  be.  Middlemen 
naturally  resent  any  incursion  on  their  territory,  and  such  possi- 
bilities of  friction  should  be  explored  before  any  final  recommenda- 
tions are  proposed. 

If  the  surveyor  finds  that  chain  store  or  mail-order  competition 
is  a  large  factor  in  the  company's  problem,  he  must  take  cogni- 
zance of  it.  Although  chain  stores  and  mail-order  houses  are 
often  problems  of  distribution,  still  they  are  fundamentally 
problems  of  competition.  The  surveyor  must  present  the  exist- 
ing facts  to  the  company's  executives  and  allow  them  to  make 
any  necessary  decision. 

Cost  of  Overcoming  Competition.  The  methods  of  coping 
with  competition  depend,  of  course,  entirely  on  the  nature  of  the 
competition,  whether  it  is  of  price,  location,  quality,  advertising, 
goodwill,  or  other  kind.  It  is  part  of  the  surveyor's  task  to 
form  some  sort  of  estimate  as  to  the  cost  of  overcoming  competition 
and  the  desirability  of  entering  markets  already  occupied  by  com- 
petitors. These  competitors  may  be  in  such  a  preferential  posi- 
tion that  it  would  be  most  unwise  to  attempt  fighting  them.  It 
is  a  question  of  whether  it  would  be  an  economic  thing  for  the 
company  to  do  under  the  circumstances. 


188  MARKET  ANALYSIS 

When  a  company  enters  an  already  occupied  field,  It  does  so 
ordinarily  with  the  knowledge  that  for  some  time  it  will  be  a 
losing  proposition.  The  market  survey  should  determine  in 
advance  just  what  the  points  of  attack  should  be  for  the  company 
in  overcoming  the  competition  and  the  relative  strength  in  the 
field  of  the  various  opponents.  This  is  usually  done  through  a 
survey  of  the  dealers,  that  is,  of  the  people  who  already  handle 
the  competitors'  products.  It  also  means  an  advertising  cam- 
paign, the  basis  for  which  should  be  largel}?^  outlined  in  the  sur- 
veyor's report.  One  of  the  very  practical  results  of  the  survey 
work  is  the  analysis  of  sales  resistance. 

Competition  with  Other  Countries.  The  surveyor  must 
study  foreign  competition  from  two  aspects,  first,  the  competition 
of  foreign  goods  with  goods  in  this  country,  and  secondly,  the 
competition  of  our  goods  with  foreign  goods  in  other  countries. 
It  may  be  that  the  product  he  is  studying  is  directly  threatened 
by  some  cheaper  foreign-made  article.  This  has  often  happened 
in  previous  years  when  cheap  labor  and  materials  abroad  helped 
capture  the  American  market.  The  safety  match  is  a  good  illus- 
tration. Prior  to  the  war  there  was  no  manufacture  of  safety 
matches  in  this  country.  The  Scandinavian  countries  and 
Japan  controlled  the  field.  During  the  war  domestic  competition 
was  possible  because  the  transportation  of  safety  matches  was 
exceedingly  difiicult.  AVhen  the  war  was  over,  our  domestic 
trade  in  safety  matches  was  again  threatened  by  the  cheaper 
product. 

Certain  countries  tend  to  monopolize  certain  industries 
throughout  the  world.  The  English  through  Lever  Brothers  dom- 
inate the  soap  market,  and  through  Lipton's  tea  interests  have 
a  large  share  in  the  tea  market.  Switzerland  has  a  monopoly 
in  a  certain  type  of  watch;  the  Dutch  in  the  tuhp  and  bulb  mar- 
ket, Germany  in  the  dye  and  toy  industry,  while  we  command 
the  automobile  field. 

The  surveyor  must  take  note  of  foreign  competition  if  only  as  a 
protection.  He  should  observe  what  other  companies  are  doing 
in  the  foreign  field,  both  aggressively  and  defensively.  He  should 
look  into  the  tariff  laws  and  other  legislation  pertaining  to  the 
subject. 

General  Conclusions.     In  this  difficult  and  important  division 


COMPETITION  189 

of  market  survey  work,  the  investigator  will  have  need  for  all 
his  powers  of  judgment.  It  is  undeniably  hard  to  estimate  com- 
petition at  its  proper  value.  He  should  be  able,  however,  with- 
out too  much  difficulty  to  determine  the  basis  of  competition  on 
which  his  company  operates.  In  other  words,  he  should  be  able  to 
ascertain  the  exact  reasons  why  the  company  is  better  or  worse 
off  than  its  competitors.  He  should  also  get  a  fairly  compre- 
hensive idea  of  the  strength  of  competition  with  which  the  com- 
pany must  contend,  and  how  great  an  effort  would  be  necessary 
to  overcome  this.  Most  important  of  all,  the  surveyor  may  be 
called  upon  to  recommend  some  radical  change  in  competitive 
methods,  as  a  result  of  this  survey. 

Whatever  conclusions  are  reached,  the  surveyor  must  remem- 
ber that  any  discussion  of  competitors  involves  a  tactful  handling 
of  the  subject.  The  company's  executives  frequently  have  an 
animosity  towards  their  opponents,  which  may  blind  them  to  many 
important  advantages  which  might  have  been  derived  from  an 
adoption  of  some  of  their  policies.  It  will  be  for  the  surveyor  to 
present  his  deductions  from  a  study  of  competition  in  such  a 
way  that  the  reasons  for  their  adoption  will  be  perfectly  plain. 


CHAPTER  XII 
THE  COMPANY'S   CUSTOMERS 

Outline 

Why  do  present  customers  buy  from  the  company? 

(a)  Habit  or  tradition. 

(1)  Is  the  line  of  business  one  in  which  the  tendency  to  switch  is 
marked? 
(6)  Personal  feeling. 

(1)  How  much  of  a  factor  is  the  salesman  in  the  success  of  the  product? 

(c)  Quicker  deliveries. 

(1)  Has  the  company  a  reputation  for  speedy  deliveries? 

(d)  Location. 

(1)  How  much  sales  resistance  is  due  to  location? 

(e)  Better  price. 

(1)  How  great  a  factor  is  price  in  selling  to  customers? 
(/■)   Better  terms. 
(g)  Quality. 

(1)  Is  the  company's  reputation  founded  on  the  quality  of  its  goods? 
(h)  Advertising. 

(1)  Do  customers  have  to  buy  company's  product  because  of  its  adver- 
tising? 

What  is  the  attitude  of  customers  towards  sales  engineering? 

(a)  Would  customers  appreciate  such  a  service? 
(6)  Should  engineer  also  be  a  salesman? 

How  may  customers  be  classified? 

(a)  Age. 

(b)  Volume  of  business. 

(c)  Location. 

(d)  Foreign  and  domestic. 

(e)  Quality. 
(J)   Transient. 

Why  have  former  customers  ceased  buying  from  the  company? 

(a)  Were  they  disgruntled  at  service? 
(6)  Have  they  found  better  product? 

190 


THE  COMPANY'S  CUSTOMERS  191 

(c)  Have  they  been  approached  by  better  sales  methods? 

(d)  Have  they  been  neglected  by  company's  salesmen? 

Is  there  an  opportunity  of  recovering  former  customers? 
(a)  Has  the  cause  for  dissatisfaction  been  removed? 

(1)  Has  the  product  been  improved? 

(2)  Have  merchandising  methods  been  changed? 


CHAPTER  XII 
THE  COMPANY'S  CUSTOMERS 

After  studying  the  product,  the  company,  the  industry,  and 
competition,  the  next  logical  study  in  the  course  of  procedure  is 
the  customers  of  the  company.  Who  are  they,  how  may  they 
be  classified,  why  do  they  buy,  why  have  they  ceased  buying? 
The  surveyor  must  be  prepared  to  answer  any  of  these  questions. 
Customers  are  not  necessarily  ultimate  consumers.  In  the  case 
of  the  manufacturer,  they  are  probably  jobbers  or  dealers,  who, 
in  turn,  have  other  customers.  Whoever  he  may  be,  the  customer 
is  ordinarily  in  a  position  to  give  his  trade  to  that  manufacturer 
or  retailer  who  will  show  him  most  in  return  for  his  money, 
whether  in  value,  service,  dehvery,  or  other  inducement. 

We  have,  it  is  true,  certain  periods  in  commercial  activity, 
termed  sellers'  markets,  when,  owing  to  economic  conditions 
which  create  shortage  of  supply,  many  buyers  have  to  take  what 
they  can  get.  The  element  of  choice  is  markedly  reduced, 
though  still  present  to  some  degree.  This  turn  of  affairs  has 
sometimes  led  companies,  placed  thus  in  a  preferential  position, 
to  abuse  their  opportunity  and  raise  prices  unduly.  The  surveyor 
must  regard  the  attitude  of  the  customer  as  of  the  greatest  impor- 
tance to  the  company.  Aside  from  all  data  on  the  product,  its 
excellence,  its  wearing  qualities,  and  its  price,  the  feeling  of  the 
customer  in  regard  to  that  product,  and  in  regard  to  the  company 
which  markets  and  manufactures  it,  largely  determines  its 
success. 

The  Customer  as  a  Source  of  Information.  The  customer, 
be  he  dealer  or  consumer,  will  have  comments  to  make  on  the 
company,  the  product,  the  methods  of  merchandising,  etc. 
These  comments  may  be  favorable  or  unfavorable  but,  for  the 
surveyor's  purpose,  they  both  serve  the  same  end,  that  of  ehciting 
criticism.  Several  instances  are  given  by  C.  P.  Russell  in  Printers' 
Ink  where  the  comments  of  customers  served  to  solve  the  com- 

192 


THE  COMPANY'S  CUSTOMERS  193 

pany's  problem.  One  instance  was  that  of  a  manufacturer  of 
electric  irons,  whose  product  was  technically  satisfactory  and  the 
price  considered  fair,  yet  it  did  not  sell.  On  application  to  con- 
sumers, the  criticism  was  made  that  the  iron  was  rough  looking. 
The  company  put  some  nickel  on  the  iron,  polished  it  up,  and 
there  was  no  further  trouble.  Another  example  was  that  of  a 
luggage  company  which  had  for  customers  only  800  out  of  a 
possible  1800  dealers  in  the  country.  Investigation  showed  that 
small  town  dealers  preferred  to  buy  complete  lines  of  luggage 
from  one  firm.  The  company  accordingly  changed  its  manu- 
facturing policy  and  increased  its  percentage  of  distribution  from 
a  very  small  figure  to  70  per  cent. 

The  field  survey  is  aimed  primarily  at  the  customer  on  the 
theory  that  he  will  know  more  about  the  practical  end  of  mer- 
chandising, that  is,  be  in  a  position  to  interpret  the  wants  of  the 
public  before  their  sentiments  get  to  the  company. 

One  of  the  great  advantages  of  consulting  the  company's 
own  customers  is  that  they  are  ordinarily  very  willing  to  express 
themselves  freely.  In  fact,  they  are  more  Hkely  to  say  precisely 
what  they  think  than  the  officials  of  the  company  itself.  Further- 
more, it  is  easy  to  get  an  entree,  since  customers  feel  that  the 
surveyor  is  one  to  whom  they  may  make,  to  their  own  advantage, 
suggestions  and  complaints. 

As  long  as  human  nature  remains  as  it  is,  customers  will  have 
complaints  to  make.  Some  of  these  may  not  be  worthy  of 
attention,  but  the  majority  will  be  of  great  value  to  the  surveyor. 
The  surprising  thing  about  many  such  complaints  is  that  many 
of  them  have  never  before  been  brought  back  to  the  company. 
The  contact  has  been  through  the  sales  department  of  the  one 
company  via  the  purchasing  department  of  the  other,  and  it 
frequently  happens  that  each  of  these  departments  is  somewhat 
isolated  from  the  rest  of  its  organization.  Salesmen  sometimes 
have  reasons  of  their  own  for  not  reporting  the  precise  status 
of  affairs,  while  purchasing  agents  are  too  often  merely  writers 
of  orders,  who  know  little  about  the  actual  performance  of  the 
merchandise  they  are  buying.  It  is,  therefore,  important  to 
interview  other  officials  in  the  customer  company  beside  those 
of  the  purchasing  department. 

If  the  commodity  in  question  is  one  which  enters  into  the 


194  MARKET  ANALYSIS 

purchaser's  product,  such,  for  instance,  as  a  carburetor  sold  to  an 
automobile  manufacturer,  it  is  just  as  necessary  to  get  the  view- 
point of  the  customer's  sales  department  as  of  his  purchasing 
department,  since  it  is  quite  likely  to  be  the  sales  department 
which  specifies  or  rejects  the  component  in  question.  As  far 
as  the  grade  and  quality  of  the  commodity  is  concerned,  reference 
should  be  had  to  the  department  which  controls  incoming  inspec- 
tion. As  to  its  general  design,  the  opinion  of  the  engineering 
department  should  be  consulted.  Even  the  ideas  of  the  cus- 
tomer's credit  man  are  not  to  be  ignored.  It  is  also  well  to  inter- 
view some  of  the  customers  of  competitors  and  find  out  the 
motives  which  induce  them  to  buy  where  they  do.  Such  infor- 
mation throws  further  light  on  the  problem  of  customers. 

When  a  customer  carries  competing  lines,  the  surveyor  should 
endeavor  to  find  out  how  the  competitor's  products  are  selling, 
what  their  good  points  are,  what  the  trouble  with  them  is,  etc. 

Many  companies  have  in  their  files  testimonials  which  may 
prove  of  value  to  the  surveyor.  As  a  rule,  however,  the  things 
which  are  wrong  will  be  of  most  help  rather  than  the  things  which 
are  perfectly  satisfactory.  The  real  value  of  testimonials  will 
come  in  comparing  them  with  current  complaints  to  see  if  the 
same  condition  of  satisfaction  is  still  existent. 

Motives  for  Purchase.  It  is  important  for  the  surveyor  to 
analyze  motives  for  buying,  because  the  company  wants  the 
customer  to  continue  to  buy  and  because  it  wants  to  find  other 
people  who  wish  to  buy.  If  the  reasons  for  purchase  are  scru- 
tinized, the  surveyor  will  find  there  are  some  which  prompt  the 
customer  to  buy  and  others  which  tend  to  make  him  go  elsewhere. 
These  motives  should  be  classified. 

A  consideration  of  the  reasons  why  a  customer,  able  to  buy 
and  in  full  knowledge  of  the  existence  and  uses  of  the  product, 
does  not  purchase,  is  almost  tantamount  to  a  consideration  of 
the  faults  he  has  to  find.  The  ideas  of  one  critical  or  potential 
customer  on  this  subject  are  not  enough.  It  is  necessary  to  try 
aU  customers  or  at  least  a  representative  selection  of  them.  Prob- 
ably there  will  be  a  considerable  amount  of  unanimity.  At 
least,  there  will  be  sufficient  agreement  to  determine  the  principal 
faults. 

This  investigation  of  the  reasons  for  fault  finding  is  of  very 


THE  COMPANY'S  CUSTOMERS  195 

direct  bearing  on  the  company  and  may  lead  to  changes  in  pohcy. 
Of  how  long  standing  are  these  complaints?  Is  it  within  the  power 
of  the  company  to  rectify  them?  A  market  survey  which  did 
nothing  but  interview  customers  might  pay  for  itself  readily, 
not  only  in  the  information  secured,  but  in  the  goodwill  acquired. 
The  customer  likes  to  feel  that  the  company  takes  an  interest  in 
him.  There  is  a  psychological  reaction  to  the  company's  benefit. 
The  surveyor  meets  customers  on  an  entirely  different  footing 
from  the  salesman.  The  surveyor  does  not  want  the  customer  to 
purchase  anything  and  has  no  order  book  concealed  in  his  pocket. 

Investigatory  work  among  customers  is  likely  to  bring  out 
many  helpful  suggestions,  such  as  new  uses  or  new  markets  for 
new  products.  Live  customers  have  constructive  ideas.  They 
have  their  fingers  on  the  public  pulse  and  are  ready  to  record  it. 
The  reason  they  do  not  express  themselves  more  often  is  that 
no  one  ever  asks  them  to.  New  customers  are  likely  to  have  more 
advanced  ideas;   old  customers  will  give  more  accurate  estimates. 

The  consensus  of  the  motives  for  buying  will  greatly  help  the 
surveyor  to  solve  the  problem  of  what  the  company's  chief  sales 
argument  should  be.  The  surveyor  must,  however,  remember 
that  many  faults  will  be  of  such  a  nature  that  the  company  will 
not  be  able  to  rectify  them. 

Analysis  of  motives  for  purchase  may  be  eye-opening  to  some 
companies.  It  allows  them  to  visualize  accurately  just  what 
their  hold  is  on  the  purchasing  pubhc,  and  if  the  tenure  of  that 
hold  is  secure.  Following  are  some  of  the  principal  motives  for 
purchase: 

(1)  Habit  or  Tradition.  Many  customers  buy  a  certain 
article  or  do  their  purchasing  at  a  certain  place  because  it  has 
become  a  habit  and  a  custom.  They  have  done  so  in  the  past 
and  will  probably  continue  to  do  so  unless  they  become  dissatis- 
fied or  are  tempted  away  by  a  superior  appeal. 

In  some  lines  of  business,  customers  are  veiy  faithful,  while 
in  others  there  is  a  great  tendency  to  "  switch."  Few  people,  for 
instance,  wish  to  eat  the  same  cereal  year  in  and  year  out,  since 
sameness  in  any  food  palls.  In  the  tobacco  field,  customers  for 
cigarettes  and  smoking  tobacco  are  fairly  stable.  In  the  cigar 
line,  dealers  estimate,  according  to  the  Milwaukee  Journal,  that 
the  percentage  of  smokers  who  shift  brands  is  about  20  per  cent. 


196  MARKET  ANALYSIS 

The  reason  most  often  advanced  is  that  no  matter  how  much  a 
man  hkes  a  cigar,  he  will  eventually  not  only  tire  of  the  taste,  but 
he  will  be  tempted  to  trj^  new  brands  because  he  becomes  inter- 
ested in  advertisements  of  new  cigars. 

The  following  is  a  tabulation  of  reasons  given  both  for  shifting 
brands  and  also  for  clinging  to  one  brand: 

Reasons  for  not  switching: 

Satisfied 16 

Used  to  taste 7 

Did  switch  until  found  present 2 

Don't  like  to  mix 1 

Like  shape  and  taste 1 

Reasons  for  switching: 

Convinced  by  publicity 16 

Try  to  find  better  quality  at  same  price 9 

Can't  enjoy  same  taste  long 6 

Quality  deteriorates 4 

Like  variety 4 

Shortage 3 

This  matter  of  habit  and  custom  is  one  which  the  surveyor 
should  not  neglect.  It  is  the  decisive  factor  in  the  success  of 
many  small  businesses,  which  depend  for  their  trade  on  this  very 
satisfaction  of  their  regular  customers  with  their  product.  This 
is  responsible  for  the  success  of  many  local  enterprises  which, 
although  they  have  never  made  any  attempt  at  broad  distribu- 
tion, yet  are  highly  prosperous. 

An  instance  has  recently  been  observed  where  an  annual 
income  of  $50,000  was  secured  on  the  steady  patronage  of  only 
2,000  customers.  The  product  was  a  specialty  cigarette.  Their 
average  consumer  smoked  one  pack  a  day,  365  a  year.  Multi- 
plying this  by  2,000  made  over  700,000  packs  of  annual  sales.  At 
30  cents  a  pack  there  was  a  gross  business  of  over  $200,000. 

(2)  Personal  Feeling.  Friends  are  one  index  of  a  salesman's 
success.  He  cultivates  the  acquaintance  of  the  purchasing  agent, 
or  whoever  may  do  the  buying,  and  tries  to  make  a  friend  of  him. 
The  salesman's  chief  asset  is  his  personality,  and  he  uses  this  per- 
sonality to  tie  customers  to  him  rather  than  to  the  representative 
of  some  rival  firm.  He  is  apt  to  look  on  these  business  friends 
as  his  exclusive  possession,  and  if  he  moves  to  another  company, 
he  often  tries  to  take  them  with  him,  and  ordinarily  does  succeed 


THE  COMPANY'S  CUSTOMERS  197 

In  removing  many  of  them  from  the  company's  books.  Thus  a 
certain  class  of  buyer  is  tied  to  the  company  only  through  the 
loyalty  of  the  salemen. 

The  influence  of  the  salesman  varies  according  to  the  com- 
modity which  he  is  selling.  In  the  case  of  nationally  advertised 
goods,  the  personality  of  the  salesman  plays  a  lesser  part.  But 
where  the  basis  of  competition  rests  on  other  grounds,  the  char- 
acter of  the  sales  force  and  its  ability  to  create  personal  good- 
will for  itself  and  for  the  company  is  very  important.  Sellers  of 
securities  for  investment  houses  often  obtain  the  confidence  and 
respect  of  their  customers.  Should  they  become  disgruntled 
with  the  house  whose  offerings  they  are  disposing  of,  they  can 
frequently  take  a  large  proportion  of  their  customers  with  them. 
This  helps  to  explain  the  large  salaries  and  munificent  commis- 
sions paid  to  salesmen  as  a  means  of  holding  their  loyalty. 

When  the  surveyor  finds  a  large  percentage  of  the  buying 
motive  attributable  to  the  personality  of  the  salesman,  he  has 
found  one  point  which  will  prove  of  much  interest  in  his  report. 

(3)  Quicker  Deliveries.  Quick  deUveries  and  prompt  atten- 
tion to  orders  appeal  greatly  to  a  customer.  A  reputation  for 
this  may  be  the  means  of  obtaining  orders  from  firms  which  had 
hitherto  purchased  elsewhere  but  now  need  delivery  promptly 
and  are  hence  placing  their  order  where  they  think  there  is  most 
likelihood  of  its  being  filled.  This  is  the  more  apt  to  happen  as 
many  companies  dislike  to  purchase  ahead  any  further  than 
necessary  and  expedient. 

(4)  Location.  In  the  city  in  which  it  is  located,  a  company 
is  known.  The  workmen  in  its  employ  spread  its  name.  Its 
products  acquire  a  local  reputation.  Customers  in  the  city  can 
be  suppHed  with  fresh  goods  almost  immediately.  There  is  a 
feeling  that  home  industries  should  be  patronized.  Thus,  many 
people  in  that  city  buy  because  they  know  the  product,  can  get 
it  at  once  and  fresh,  and  are  helping  their  own  town  or  city. 

On  the  other  hand,  when  the  company  is  at  a  distance,  it  has 
to  convince  customers  in  that  city  why  it  is  better  for  them  to 
buy  out-of-town  goods  rather  than  patronize  a  local  industry. 
This  question  of  local  demand  is  a  species  of  sales  resistance  with 
which  every  company  doing  business  in  other  cities  must  cope. 
National  advertising  docs  away  with  local  demand  to  a  certain 


198  MARKET  ANALYSIS 

extent.  Branch  warehouses  and  local  offices  do  away  with  other 
disadvantages.  The  opinions  of  customers  on  these  points  will 
be  valuable  and  perhaps  instructive.  From  their  own  experiences 
they  will  be  able  to  offer  suggestions  as  to  methods  of  overcoming 
this  unpediment. 

(5)  Better  Price.  Many  customers  buy  goods  on  price,  re- 
gardless of  quality.  Some  other  people  buy  goods  for  the  quahty, 
regardless  of  price.  The  majority,  of  course,  buy  goods  be- 
cause of  the  quality  obtainable  for  the  price  they  can  afford  to 
pay.  If  a  company  can  undersell  its  competitors  on  goods  of 
approximately  the  same  quality,  it  should  have  no  difficulty  in 
securing  customers.  But  the  surveyor  will  find  that  the  price 
wall  not  vary  much  for  the  same  quality  of  goods.  In  some 
industries  the  price  has  been  so  standardized  that,  in  normal 
times,  quotations  of  rival  companies  will  vaiy  by  but  a  fraction 
of  a  cent. 

When  the  Chicago  Tribune  made  an  investigation  of  the 
cleanser  market  in  Chicago,  it  found  that  the  brand  selling  high- 
est retailed  for  5  cents,  while  the  nationally  advertised  brand, 
selling  for  10  cents,  and  admittedly  better  in  quality,  sold  far 
beneath.  All  dealers  agreed  that  it  was  easier  to  sell  a  five-cent 
product  and  this  was  the  main  reason  for  the  remarkable  sale 
of  the  lower  priced  article  in  which  volume  of  sales  was  exception- 
ally high,  dealers  disposing  of  from  3  to  100  cans  of  the  five  cent 
cleanser  to  one  of  the  other.  This  held  true  even  in  high-grade 
neighborhoods  where  quahty  is  usually  the  guiding  motive  for 
purchase. 

In  studying  the  price  motive  for  purchase,  the  sur\^eyor  should 
remember  that  after  all  the  price  of  an  article  is  of  interest  to 
everyone,  and  that,  if  it  is  not  right,  the  organization  is  not 
functioning  properly. 

(6)  Better  Terms.  Some  people  buy  from  a  company  because 
of  better  terms.  What  do  the  customers  think  of  the  company's 
system  of  credits?  The  problem  of  terms  is  a  difficult  one. 
Although  the  majority  of  the  customers  desiring  easy  terms  are 
bona  fide  customers,  able  and  walHng  to  pay,  a  certain  percentage 
will  never  be  able  to  settle  up  their  debts.  This  causes  many 
companies  which  have  had  unfortunate  experiences  to  be  very 
tight  with  credits. 


THE  COMPANY'S  CUSTOMERS  199 

(7)  Quality.  Quality  is  often  found  to  be  the  motive  for 
purchase,  and  more  especially  the  uniformity  of  the  quahty. 
That  is,  the  customer  feels  that  he  may  rely  upon  the  company's 
products  as  always  being  the  same. 

Ninety  per  cent,  of  grocers  interviewed  in  a  coffee  investigation 
said  they  would  keep  the  quality  of  the  coffee  no  matter  what 
happened.  They  considered  that  the  public  wanted  the  best 
coffee  regardless  of  times  or  existing  conditions.  Some  grocers 
had  special  high-grade  coffee  prepared  for  them,  and  in  the  major- 
ity of  cases  they  found  this  to  be  their  best  seller.  Customers 
would  not  buy  coffee  with  chicory  ground  in  it,  and  some  people 
bought  bulk  coffee  that  they  might  be  sure  it  was  free  from 
adulterants. 

Quality  is  definitely  a  drawing  card  of  great  value.  The 
surveyor  may  be  surprised,  however,  to  find  how  much  a  few 
off-grade  shipments  will  prejudice  that  company  in  the  eyes  of 
the  customer,  even  although  the  previous  hundred  shipments 
had  been  all  up  to  grade. 

(8)  Advertising.  Many  companies  have  attained  such  repu- 
tation through  their  advertising,  that  the  public  naturally  buy 
their  products.  The  dealer  is  compelled  to  cany  their  line 
because,  if  he  did  not,  he  would  lose  trade.  Such  articles  are 
trade-marked  and  the  names  are  so  familiar  as  to  be  known  the 
country  over.  For  instance,  almost  every  grocer  carries  Ivory 
Soap  and  Quaker  Oats,  because  people  ask  for  these  articles. 
The  hardware  dealer  carries  Disston  and  Simonds  saws,  and  the 
same  tendency  holds  true  in  nearly  every  industry.  There  are 
certain  nationally  distributed  articles  which  must  be  carried  in 
stock.  The  customer  ordinarily  thinks  in  terms  of  the  adver- 
tised article.  If  a  company  does  not  occupy  this  preferential 
position  of  publicity,  and  has  to  compete  with  another  company 
that  does,  it  is  at  a  disadvantage.  Its  selling  campaign  must 
be  worked  out  with  full  knowledge  of  the  difficulties.  By  asking 
the  customer  what  particular  brands  are  most  popular,  the  sur- 
veyor can  get  some  idea  of  the  sales  resistance  to  be  overcome. 

The  analysis  of  these  various  motives  for  purchase  allows 
the  surveyor  to  comprehend  exactly  the  reasons  for  the  com- 
pany's success  or  failure  with  customers.  Has  the  company 
stressed  the  right  motive  or  has  it  spent  its  efforts  trying  to  sell 


200  MARKET  ANALYSIS 

goods  for  reasons  which  carry  no  emphasis.  The  surveyor  must 
make  the  company  reahze  that  it  cannot  hope  to  reach  its  maxi- 
mimi  efficiency  in  selHng  until  it  understands  these  buying 
motives. 

Sales  Engineering.  Nearly  every  customer  appreciates  serv- 
ice in  any  form.  Many  of  the  points  previously  enumerated  have 
been  actual  services.  The  work  of  the  advertising  agency  is 
largely  based  on  service,  not  in  the  sense  that  the  automobile 
repair  shop  gives  service,  but  in  doing  things  which  the  custom- 
ers will  appreciate. 

There  has  been  a  great  deal  of  attention  paid  of  late  years 
to  the  problem  of  sales  engineering,  a  form  of  service  which  some 
companies  have  installed  and  others  are  seriously  considering. 
The  sales  engineer's  first  function  is  to  ascertain  the  technical 
demands  of  the  customer.  He  interriews  the  chief  engineer 
instead  of  the  purchasing  agent.  He  may  be  a  salesman  and  he 
may  not.  He  offers  his  help  in  solving  any  problems  that  may 
have  arisen  in  connection  with  the  use  of  the  company's  product. 

Although  sales  engineering,  strictly  speaking,  is  confined  to 
those  businesses  in  which  a  technical  element  enters,  it  is  being 
extended  to  cover  other  cases.  It  is  quite  possible  for  a  company 
to  send  out  men  trained  in  the  analysis  of  customer  and  dealer 
problems  who  may  very  possibly  be  of  assistance  to  the  customer 
in  merchandising  his  product.  The  day  has  passed  when  com- 
panies merely  unload  their  products  on  the  dealers.  They  now 
assist  in  the  further  marketing  of  their  product,  not  only  by 
national  advertising  but  by  more  personal  dealer  helps.  The 
automobile  industry  is  entitled  to  much  credit  for  developing 
this  idea. 

The  benefits  of  the  sales  engineer  are  not  only  actual  but 
psychological.  Once  a  man  has  unburdened  himself  of  his  com- 
plaints he  speedily  forgets  about  them,  whereas,  if  he  dams  them 
up,  he  may  carry  them  about  in  his  mind  for  years.  Of  course, 
the  sales  engineer  may  incur  the  enmity  of  the  purchasing  depart- 
ment, which  may  consider  that  he  has  gone  over  its  head.  His 
work  necessitates  tact. 

In  studying  the  customers,  the  surveyor  might  find  it  advis- 
able to  try  out  the  feeling  about  sales  engineering  in  the  business. 
What  do  they  think  would  be  the  benefit?  Would  they  themselves 


THE  COMPANY'S  CUSTOMERS  201 

appreciate  it?   As  a  form  of  service,  would  it  be  worth  the  expense 
of  maintenance? 

Classifying  Customers.  The  surveyor  will  get  more  uniform 
results  from  all  parts  of  his  work  if  he  can  classify  as  much  as 
possible  before  analysing.  Thus,  in  the  study  of  customers, 
there  are  certain  divisions  into  which  the  subject  naturally  falls, 
depending,  of  course,  on  the  purpose  of  the  investigation. 

(1)  Age.  For  some  purposes  it  would  be  advisable  to  divide 
customers  according  to  whether  they  are  new  or  old  accounts  on 
the  company's  books.  This  would  allow  consideration  of  increase 
in  number  of  new  customers,  and  how  much  of  the  volume  of 
sales  is  due  to  new  customers  in  comparison  with  old  ones. 

(2)  Volume  of  Business.  Customers  may  also  be  classified 
according  to  the  amoimt  of  business  they  do.  Naturally  more 
weight  is  attached  to  the  opinions  of  the  big  companies  and  the 
surveyor  should  make  particular  efforts  to  obtain  information 
from  them.  However,  if  a  considerable  volume  of  sales  goes  to 
small  customers,  their  comments  also  are  valuable. 

(3)  Location.  Some  customers  are  near  at  hand  and  others 
distant.  By  classifying  them  in  this  way,  the  surveyor  can  observe 
the  influence  of  the  geographical  location,  not  only  upon  numbers 
of  customers,  but  upon  sales  volimie  per  customer,  etc.  He  can 
measure  in  this  way  what  advantage  location  and  proximity  to 
market  gives. 

(4)  Foreign.  In  line  with  the  above,  customers  can  be 
classified  as  domestic  or  foreign,  and  the  surveyor  can  make 
comparisons  between  the  kind  of  demand,  the  different  require- 
ments, the  percentage  of  profit,  etc. 

(5)  Quality.  Customers  can  be  divided  in  some  cases  into 
those  who  buy  high-quality  goods  and  those  who  buy  low-quality. 
This  will  give  an  opportunity  for  the  surveyor  to  observe  the 
relative  volume  of  orders,  according  to  quality. 

(6)  Transient.  Another  way  in  which  to  classify  customers 
is  by  considering  them  as  transient  or  regular.  This  applies  to 
almost  every  industry.  A  certain  amount  of  business  comes 
through  regular  channels  and  another  amount,  which  may  vary 
considerably,  comes  from  sources  which  will  probably  never  buy 
again. 

The  regular  customer  is  measured  by  the  frequency  of  repeat 


202  MARKET  ANALYSIS 

orders.  It  behooves  the  company  to  treat  this  customer  well. 
When  the  customer  is  on  the  wing  and  never  is  going  to  appear 
again,  it  is  doubtful  if  money  should  be  spent  in  the  endeavor 
to  bring  him  back.  The  difficulty  lies  in  telling  just  who  is  a 
transient  customer.  He  is  quite  as  likely  to  prove  to  be  a  new 
customer.  The  surveyor  should  notice  if  possible  the  percentage 
of  regular  customers  and  the  degree  of  transient  trade. 

The  chain  drug  store's  business  is  said  to  be  largely  transient. 
The  convenient  location  enables  it  to  sell  almost  any  sort  of 
merchandise  which  the  public  will  buy  on  sight.  The  business 
of  the  individual  druggist  is  based  on  a  more  personal  service. 

The  hotels  are  an  instance  where  the  usual  order  is  reversed 
and  the  transient  trade  is  highly  important.  Although  there  are 
regular  guests  who  make  particular  hotels  their  headquarters 
whenever  they  are  in  a  city,  the  profit  comes  from  the  attractions 
the  hotel  offers  to  transients.  For  instance,  in  New  York  and  other 
big  cities,  a  large  number  of  people  visit  there  during  the  year  for 
purposes  of  sight-seeing  who  may  never  go  there  again.  The  same 
is  even  more  true  of  hotels  in  certain  foreign  countries  where  the 
tourist  trade  is  the  chief  source  of  living,  such  as  the  hotels  in 
Switzerland. 

In  all  these  methods  of  classification,  the  surveyor  must  bear 
in  mind  that  it  does  no  good  unless  a  practical  application  may  be 
made  of  it.  But  if  customers  are  transient,  it  is  a  decided  advan- 
tage for  the  surveyor  to  know  what  methods  of  selling  are  best 
adapted  to  this  class.  If  the  customers  are  looking  for  quality 
goods,  this  is  an  important  point  which  has  a  bearing  on  the  rest 
of  the  work  of  analysis.  In  similar  fashion  the  other  classifica- 
tions pertain  to  some  phase  of  the  investigation.  Other  classi- 
fications which  may  be  valuable  will  occur  to  the  surveyor  relating 
to  his  specific  problem. 

Former  Customers.  People  who  have  once  been  customers 
and  are  no  longer  buying  from  the  company  may  have  very 
valuable  information  for  the  surveyor.  It  is  a  case  of  the  construc- 
tive value  of  destructive  criticism.  The  fact  that  they  have 
ceased  being  customers  does  not  interest  him  particularly  so  much 
as  the  reasons  why  they  have  ceased.  Have  they  found  a  better 
product?  Have  they  been  approached  by  better  sales  methods, 
and  if  so,  what  were  they?  Have  they  ever  made  objections  about 


THE  COMPANY'S  CUSTOMERS  203 

delivery,  packing,  quality,  etc.?  Is  there  any  possibility  of  restoring 
goodwiD? 

All  former  customers  will  not  be  disgruntled  ones.  Some 
wUl  prove  to  be  neglected  customers  whom  the  salesman  has  not 
been  round  to  see  recently.  Some  will  prove  to  be  chronic 
kickers  who  beheve  complaining  is  the  best  way  of  getting  service, 
and  consequently  are  continually  changing  from  one  seller  to 
another. 

It  frequently  happens  that  the  reasons  wnicn  causea  a  customer 
to  stop  buying  have  long  since  been  removed.  This  is  often  the 
case  where  improvements  in  the  product  have  been  introduced 
to  overcome  just  such  difficulties.  The  customer  may  never 
have  heard  of  the  improvements. 

General  Conclusions.  (1)  So  far  the  surveyor  has  devoted 
himself  to  studies  of  a  more  or  less  general  nature,  but,  with  the 
approach  to  customers,  his  work  becomes  positively  and  imme- 
diately constructive.  His  operations  serve  not  only  to  bring  in 
information,  but  they  also  pave  the  way  to  sales. 

(2)  The  customer's  reaction  is  the  quickest  index  of  a  market 
and  most  easily  obtained.  It  supplements  the  broader  indexes 
got  from  studies  of  the  industiy  in  general. 

(3)  The  customer  has  a  different  feeling  towards  the  surveyor 
than  towards  salesmen.  He  is  more  responsive  and  generally 
feels  that  his  views  are  being  heeded.  He  feels  that  his  case  is 
receiving  careful  and  personal  attention. 

(4)  The  surveyor  is  in  a  position,  if  he  has  the  ability,  to  act 
as  a  liaison  officer  and  to  make  the  customer  a  part  of  the  com- 
pany's own  organization.  He  strengthens  relationships  by  making 
a  point  of  contact  other  than  merely  through  the  sales  depart- 
ment. Incidentally,  his  work  acts  as  a  stimulus  on  the  sales 
department  and  a  check  up  on  its  efficiency. 

(5)  Probably  the  surveyor  can  obtain  more  immediate  and 
tangible  value  from  a  study  of  customers,  and  with  less  effort, 
than  he  could  from  any  other  subject.  Prospective  customers 
as  well  as  present  patrons  may  be  interviewed.  The  surveyor 
can  more  easily  obtain  an  entree  in  a  new  house  than  a  salesman. 

But,  after  all,  the  study  of  the  customer  is  mainly  to  be  con- 
sidered as  a  prelude  to  that  of  the  consumer.  In  many  cases 
the  customer  is  merely  the  mirror,  the  mouthpiece,  of  the  consumer. 


204  MARKET  ANALYSIS 

He  buys  what  consumers  will  purchase  of  him.  To  understand 
the  motives  of  the  customer,  it  is  necessaiy  to  understand  the 
attitude  of  the  consumer,  and  his  motives  for  purchase.  Accord- 
ingly, the  surveyor's  next  task  is  a  study  of  the  different  aspects  of 
the  consumer  problem. 


CHAPTER  XIII 

THE  ULTIMATE  CONSUMER 

Outline 
Why  is  this  product  bought? 
Do  people  need  it? 
Is  it  bought  from  habit? 
Has  some  friend  recommended  it? 
Has  it  been  seen  on  display  or  exhibition? 
Was  it  bought  because  of  advertising? 

What  is  the  influence  on  the  market  of  the  consumer's 
Sex: 

(a)  Is  it  bought  by  men  for  men? 

(6)  Is  it  bought  by  women  for  women? 

(c)  Is  it  bought  by  men  for  women? 

(d)  Is  it  bought  by  women  for  men? 

Race: 

Does  the  foreign  population  buy  the  product?   If  not,  is  it  because  of 

(a)  Racial  prejudice? 

(b)  Lack  of  knowledge? 

Rehgion : 

Does  religion  affect  the  market?  If  so,  to  what  extent  and  how  seriously? 

Age: 

(o)  Is  it  bought  for  children? 

(b)  Is  it  bought  for  adults? 

(c)  Is  it  bought  for  old  people? 
Disabilities : 

Is  the   market  for  the  product  dependent  on  any  infirmity  in  the 
consumer? 

(a)  Natural  disability. 
(6)  Result  of  accident. 

Prejudices: 

If  a  prejudice  exists,  is  it 

(a)  Permanent? 

(b)  Temporary? 

205 


206  MARKET  ANALYSIS 

Buying  Habits: 

Are  consumers  influenced  by  habit  in  the  purchase  of  this  product? 
Occupation: 

(c)  Does  it  determine  the  entire  market? 

(b)  Does  it  partially  determine  the  market? 

Class: 

(a)  Is  it  bought  because  of  social  position? 

(b)  Is  it  bought  because  of  class  taste? 

(c)  Is  it  bought  because  of  wealth? 

Expert  Knowledge: 

How  much  skill  is  required  to  operate  or  make  use  of  the  product? 
(a)  Must  it  be  taught? 
(6)  Can  consumer  learn  to  operate  by  himself? 

Literacy: 

(o)  Is  this  important  in  merchandising  the  product? 

Amusements  and  Hobbies. 


CHAPTER  XIII 
THE  ULTIMATE   CONSUMER 

A  STUDY  of  the  market  Is  nothing  more  or  less  than  a  study 
of  a  composite  number  of  individual  consumers.  The  surveyor 
will  find  it  advisable  to  consider  the  consumer  in  two  ways. 

(1)  As  a  Unit.  It  is  necessary  to  study  the  average  individual 
making  up  the  group.  His  character,  his  habits,  and  his  pecu- 
liarities must  be  scrutinized. 

(2)  As  a  Group.  The  average  individual  must  also  be  studied 
collectively,  which  means  statistically.  In  how  large  groups  is  he 
found?  Where  is  he  most  likely  to  be  found,  how  much  money 
has  he,  etc.? 

There  are  two  further  aspects  of  every  market  which  entail  a 
consideration  of  the  consumer  with  respect  to  the  company. 

(3)  Potentialities.  What  are  the  company's  possibilities  of 
obtaining  further  business?  Fundamental  to  this  consideration  is 
the  ratio  between  the  business  the  company  is  now  doing  to  all 
the  business  there  is  being  done  in  the  field.  Unless  the  company 
is  an  absolute  monopoly,  there  are  still  sales  going  elsewhere,  and 
it  is  necessary  to  consider  how  many  more  of  these  sales  can  be 
got  for  the  company. 

(4)  Limitations.  Every  market  has  limitations.  These  limi- 
tations are  the  factors  which  tend  to  curtail  the  expansion  of  the 
business.  They  may  be  physical  limitations,  such  as  the  size  of  the 
product  or  difficulties  of  transportation,  or  psychological  limita- 
tions, such  as  prejudices  and  habits. 

The  present  chapter  will  discuss  the  first  point  mentioned, 
that  is,  the  final  purchaser  as  a  unit,  or,  as  he  is  more  commonly 
called,  the  ultimate  consumer.  The  other  points  mentioned  will 
be  taken  up  in  the  two  following  chapters. 

Classification  of  Markets.  Markets  can  generally  be  classi- 
fied according  to  the  nature  of  the  product.  No  definite  classi- 
fication can  be  made  owing  to  the  vast  diversity  of  products  and 

207 


208  MARKET  ANALYSIS 

the  corresponding  diversity  of  markets.  But,  in  general,  lines 
of  demarcation  may  be  made,  as  in  the  case  of  the  product, 
betAvcen  foodstuffs  and  raw  materials,  machinery  for  production, 
manufactured  goods,  and  services. 

The  question  every  manufacturer  must  ask  himself  first  is: 
Who  is  going  to  use  my  product?  This  is  a  fundamental  inquiry. 
A  market  consists  not  only  of  sales  which  are  now  being  made, 
but  also  of  further  sales  possibilities.  The  actual  market  for  a 
product  consists  of  current  purchases  of  that  product.  The 
potential  market  consists  of  all  the  people  who  should  be  logical 
consumers  of  the  product,  that  is,  the  ones  with  a  need  or  desire 
for  it  and  money  enough  to  satisfy  that  need  or  desire.  Every 
growing  company  obtains  its  success  through  capitalizing  these 
potential  markets. 

The  actual  and  potential  markets  for  raw  materials  and 
machinery  are  as  a  rule  well  defined.  It  is  known  in  what  ways 
and  where  a  raw  material  or  a  machine  may  be  utilized.  But 
when  it  comes  to  the  consideration  of  manufactured  products 
marketed  to  the  ultimate  consumer,  the  question  still  remains: 
"  Who  is  the  ultimate  consumer?"  Is  he  man,  woman  or  child; 
is  he  rich  or  poor,  married  or  single,  office  worker  or  gentleman 
of  leisure?  A  careful  study  of  these  seemingly  unimportant 
matters  has  often  been  shown,  in  actual  experience,  to  throw 
much  light  on  questions  which  previously  could  not  be  ex- 
plained. 

The  actual  market  is  seldom  as  large  as  the  potential  market. 
Ordinarily,  there  is  wide  opportunity  for  expansion.  Services 
and  intangible  products  often  have  the  widest  market  of  all,  as 
far  as  potentiahties  go.  The  personal  element  affords  much  chance 
for  broadened  activities  through  careful  market  analysis. 

This  classification  of  products  serves  to  emphasize  in  the 
mind  of  the  surveyor  just  what  may  be  expected  in  the  way  of 
actual  and  potential  markets.  In  the  case  of  the  raw  material, 
he  must  deal  almost  entirely  with  actuahties,  unless  he  can  invent 
a  new  use  for  the  material.  In  the  case  of  the  machine,  there  is 
more  leeway,  since  methods  of  manufacture  often  change  slowly. 
In  the  manufactured  product,  there  are  usually  vast  potentiali- 
ties beyond  actual  use,  and  in  the  intangible  field,  the  possibilities 
are  determined  largely  by  personal  ability  and  effort. 


THE  ULTIMATE  CONSUMER  209 

Motives  for  Purchase.  The  consumer's  motives  for  purchase 
are  so  vitally  important  that  the  average  business  man  usually 
has  studied  them.  Why  do  people  buy?  Do  they  exercise  their 
own  discretion  in  purchasing?  What  makes  them  want  one  hue  of 
goods  more  than  another?  Is  it  habit?  If  so,  what  formed  this 
habit?  Is  it  advertising?  It  seems,  for  example,  natural  to  ask  for 
Quaker  Oats  in  advance  of  other  brands  of  cereals  because  of  the 
long  campaign  of  publicity  which  the  company  manufacturing  this 
product  has  kept  up.  Again  people  often  buy  because  someone 
has  told  them  to.  This  is  frequently  the  case  with  amusements 
and  books.  People  also  buy  things  because  they  see  them. 
Previous  to  having  seen  them,  they  had  no  thought  of  purchase. 
It  is,  therefore,  apparent  that  people  may  exercise  Httle  or  no 
discretion.  This  affords  an  opportunity  to  the  person  selling  the 
product  to  show  his  ability  in  creating  wants  where  none  previ- 
ously existed,  or,  if  existing,  had  lain  dormant.  It  is  the  faculty 
of  doing  this  which  we  know  as  salesmanship. 

As  an  instance  of  this,  in  industrial  organizations,  articles  are 
usually  bought  on  recommendation  of  someone  other  than  the  man 
actually  going  to  use  them.  A  manufacturer  may  buy  equipment 
bhndly  on  the  order  of  his  engineering  department.  The  major- 
ity of  people  buy  medicines  blindly  upon  a  physician's  prescrip- 
tion without  knowing  even  the  contents. 

This  matter  of  ascertaining  why  people  buy  is  an  important 
study  for  any  person  connected  with  sales  work.  The  sales 
manager  of  a  company  is  frequently  gifted  with  excellent  vision 
as  to  how  to  get  people  to  buy.  But  his  inabihty  lies  in  allo- 
cating the  demand  properly.  Much  energy  is  wasted  in  quarters 
where  it  is  hopeless  to  expect  demand,  and  much  time  is  spent 
otherwise  which  might  profitably  be  devoted  to  opening  up  new 
prospects.  A  knowledge  of  motives  for  purchase  is  fundamental 
to  the  phrasing  of  any  buying  appeal. 

The  Consumer  as  a  Unit.  Just  as  in  the  law  courts,  a  man's 
actions  are  judged  by  the  standard  of  what  a  reasonable  man 
would  have  done  under  similar  circumstances,  so  too,  in  the  work 
of  market  analysis,  the  average  consumer  is  set  up  as  the  standard 
of  comparison.  In  him  are  typified  the  buying  habits  and  the 
peculiarities  of  the  group. 

It  has  been  pointed  out  that  the  average  consumer,  if  such 


210  MARKET  ANALYSIS 

a  person  actually  existed,  would  be  quite  the  opposite  of  what 
we  think  of  as  average,  that  is,  normal.  He  would  be  doing  a 
little  of  eveiything,  playing  golf,  riding  in  a  street  car,  a  train,  and 
an  automobile  eveiy  day;   he  would  be  an  impossibility. 

The  "  average  consumer  "  is  a  figment  of  the  imagination, 
created  to  typify  the  demands  which  arise  most  frequently 
among  the  greatest  number  of  people.  For  him  the  company 
prepares  its  goods,  and  for  him  it  draws  up  its  plans  for  market- 
ing them.  Therefore,  any  market  investigation  must  probe  into 
the  various  traits  that  go  to  make  up  this  average  consumer. 
The  following  attributes  of  the  average  consumer  are  intended 
to  be  only  suggestive.  Every  business,  of  course,  will  have  a 
different  average  prospect,  with  differing  average  traits.  In 
fact,  these  specific  traits  may  not  have  been  mentioned  here,  but 
may  be  pecuKar  to  the  business.  The  surveyor  will  be  able  to 
judge  this  for  himself  readily. 

Sex.  Sex  has  much  to  do  with  the  market.  In  the  first  place, 
there  are  »  great  number  of  articles  sold  exclusively  to  one  sex. 
Men's  wear  and  women's  wear  are  examples.  In  this  very  line, 
however,  some  interesting  anomalies  may  be  noted.  Neck-ties 
are  in  many  cases  bought  by  women  for  men. 

There  are  other  articles  which  one  sex  patronizes  to  a  greater 
extent  than  the  other,  although  not  exclusively.  The  majority 
of  the  patrons  of  a  department  store  are  women;  the  majority 
of  the  patrons  of  a  hardware  store  are  men,  yet  a  certain  percent- 
age of  the  opposite  sex  makes  purchases  in  both  shops. 

The  important  point  to  notice  in  market  analysis  is  a  tendency 
of  one  sex  or  the  other  to  predominate  in  purchasing  an  article, 
since  this  will  determine  in  many  ways  the  sales  appeal,  and 
perhaps  the  character  of  the  product  offered.  The  whole  market 
should  be  analyzed  in  this  light.  This  factor  may  determine  the 
character  of  the  advertising  and  the  media  to  be  employed.  It 
will  also  determine  in  some  measure  the  place  where  the  articles 
will  be  sold,  the  methods  of  merchandising,  etc. 

Race.  When  considering  local  markets,  the  surveyor  will  be 
likely  to  find  racial  peculiarities  which  influence  the  market.  For 
example,  it  is  possible  that  the  foreigner  may  have  a  different 
taste  from  the  native,  and  that  the  appeal  to  his  taste  lies  through 
different  channels.     In  the  majority  of  cases,  race  is  a  strictly 


THE  ULTIMATE  CONSUMER  211 

local  problem,  confined  to  certain  sections  of  the  city  markets, 
and  perhaps  some  country  districts  where  the  foreign  element  is 
predominant. 

According  to  a  survey  of  the  market  for  margarines,  no  deal- 
ers in  the  Italian  district  of  Milwaukee  were  found  to  carry  butter 
substitutes.  Italians  were  not  yet  educated  to  its  use.  Jewish 
and  Polish  dealers  handled  only  a  small  quantity,  or  none  at  all. 
Dealers  of  tliis  class  constituted  25  per  cent,  of  the  total.  Practi- 
cally aU  the  others  carried  margarines,  and  therefore  this  racial 
prejudice  or  lack  of  knowledge  constituted  a  real  barrier  to  sales. 
The  seemingly  unfounded  peculiarities  of  other  races  are  usually 
based  upon  facts  which  wiU  become  clear  on  careful  analytical 
study. 

Religion.  In  the  past,  religious  convictions  have  been  genuine 
bars  to  the  extension  of  certain  markets  as,  for  example,  playing 
cards.  This  barrier  is  less  marked  than  formerly.  On  the  other 
hand,  the  religious  custom  of  abstaining  from  meat  on  Friday 
has  become  wide-spread  and  is  a  very  real  factor  in  the  market 
for  fish  products. 

The  surveyor  wiU  seldom  come  in  contact  with  religious 
limitations  of  great  importance.  There  are,  however,  certain 
industries  the  outputs  of  which  are  limited  entirely  or  largely  to 
religious  purposes.  For  instance,  the  stained  glass  industry 
relies  upon  churches  for  much  of  its  trade,  the  publishers  of  reli- 
gious periodicals  and  books  are  dependent  upon  the  religiously 
minded  for  purchase,  etc. 

A  survey  made  by  Pacific  Ports  points  out  that  there  is  a 
large  market  for  communion  veils  in  South  America  with  prices 
ranging  as  high  as  $300.  This  is  an  effect  of  religious  infliuence 
on  the  market  carried  to  an  extreme. 

Age.  The  limitation  of  age  is  in  most  cases  apparent.  It  is 
evident  that  children's  toys,  clothing,  books,  and  magazines  have 
easily  defined  age  limitations.  Certain  infant  foods  are  limited 
to  children  during  the  first  few  years  of  their  lives. 

In  many  cases,  when  computing  the  market,  the  surveyor 
must  allow  for  age.  The  New  Orleans  Item,  in  its  investigation 
of  the  safety  razor  market,  figured  eveiy  male  from  the  age  of 
fifteen  up  as  a  possible  buyer  of  a  safety  razor.  There  arc 
approximately    3,938,904    people    in    the    Louisiana-Mississippi 


212  MARKET  ANALYSIS 

tcrritoiT,  30.5  per  cent,  of  them  males  above  the  age  of  fifteen, 
or  a  total  of  1,201,383.  As  approximately  75,000  razors  arc  now 
sold  annually,  it  can  be  seen  easily  that  the  market  is  by  no  means 
exhausted. 

This  is  a  good  example  of  the  practical  results  of  computing 
a  market  and  how  the  nature  of  the  ultimate  consumer  deter- 
mines the  amount  of  sales.  That  is,  the  number  of  razors  sold 
is  limited  first  by  the  sex  and  second  by  the  age  of  the  consumer. 
This  will  give  the  surveyor  an  idea  of  how  he  may  use  similar 
facts  in  computing  his  own  market. 

Disabilities.  Several  sizable  industries  and  many  minor  ones 
are  founded  on  human  disabilities.  For  example,  the  optical 
business  is  based  largely  on  a  disability  in  eyesight.  The  sur- 
veyor who  was  attempting  to  analyze  the  field  for  eyeglasses, 
therefore,  should  make  it  his  business  to  ascertain  in  what  sections 
of  the  countiy  or  of  the  world  eyeglasses  were  most  worn.  In 
tropical  countries,  for  instance,  where  the  glare  of  the  sun  affects 
the  eyesight,  the  market  for  glasses  is  greatly  increased. 

There  are  several  great  patent  medicine  businesses.  There 
are  also  many  makers  of  artificial  limbs.  The  drug  business 
was  originally  confined  to  supplying  antidotes  and  remedies  for 
human  ills.  The  maker  of  shoes  has  to  take  into  consideration 
the  number  of  people  with  flat  feet,  etc.  Whenever  this  element 
of  disability  occurs,  it  is  apt  to  play  a  prominent  part. 

Prejudice.  The  surveyor  will  find  occasionally  that  prej- 
udices are  important  in  determining  the  market.  These  prej- 
udices may  be  temporary^  or  they  may  be  permanent.  In  many 
cases  it  is  possible  to  remove  them.  The  question  is  whether 
it  is  worth  the  expense. 

Food  prejudices  have  been  frequent.  Some  decades  ago 
tomatoes  were  regarded  as  poison,  the  eating  of  the  oyster  in  a 
raw  state  is  comparatively  recent,  and  there  is  still  some  prej- 
udice against  eating  young  veal.  As  an  example  of  a  temporary 
prejudice,  the  unpopularity  of  the  slogan  "  Made  in  Germany  " 
might  be  cited. 

There  is  still  a  great  deal  of  prejudice  against  the  smoking 
of  cigarettes  by  women,  although  there  may  seem  to  be  no  more 
reason  why  women  should  not  smoke  than  there  is  why  men 
should  stop  smoking.     Actually,  however,  the  prejudice  against 


THE  ULTIMATE  CONSUMER  213 

women's  smoking  has  been  transmitted  for  generations  and  the 
practice  has  never  been  universal. 

Before  the  war  for  a  man  to  carry  a  wrist  watch  was  a  sign 
of  effeminacy,  yet  this  prejudice  has  fallen  by  the  wayside  before 
a  recognition  of  the  utility  of  the  practice.  There  is  prejudice  by 
stenographers  against  the  dictating  machine  which  the  various 
makers  are  doing  their  best  to  remove  by  means  of  educational 
advertising.  It  has  been  found  by  investigation  that  there  is  an 
almost  universal  prejudice  in  favor  of  linen  toweling  against  cotton 
toweling,  and  it  is  believed  that  for  an  indefinite  time  to  come 
people  of  wealth  as  a  class  will  buy  linen  as  long  as  linen  is  obtain- 
able, regardless  of  cost. 

A  prominent  trade  journal  cites  a  case  where  an  effort  was 
made  to  change  the  method  of  packing  shingles.  In  the  old  way, 
four  bunches  of  shingles  made  a  thousand  and  the  bundle  was 
not  designed  to  cover  any  particular  area.  The  plan  was  proposed 
that  shingles  should  be  packed  so  that  four  bundles,  when  laid 
with  a  certain  exposure,  would  cover  just  100  square  feet,  and 
because  of  ease  in  figuring,  and  because  other  roofings  were  sold 
in  this  way,  it  was  thought  the  change  would  be  welcomed. 
However,  it  was  found  impossible  to  get  the  plan  adopted,  so 
great  was  the  prejudice  in  favor  of  the  time-honored  method. 

There  has  been  in  the  past  great  prejudice  against  oleomar- 
garines, but,  as  the  Baltimore  News  points  out  in  its  survey  of  the 
margarine  market,  this  prejudice  is  rapidly  disappearing.  In 
1919  alone  sales  of  animal  fat  margarines  in  Baltimore  increased 
81  per  cent,  and  vegetable  fat  margarines  51  per  cent. 

To  sum  up,  there  are  some  prejudices  so  deeply  rooted  as  to 
be  ineradicable,  while  others,  by  educational  methods,  may  be 
overcome.  Here,  as  ever,  the  surveyor  must  probe,  analyze,  and 
define.  He  must  thoroughly  understand  the  objection  itself, 
and  the  reasons,  if  there  are  any,  which  underlie  it.  Prejudices  are 
important.  There  are  few  businesses  which  are  not  affected  by 
them.  But  the  place  to  look  for  prejudice  is  not  in  the 
company,  but  without,  by  direct  contact  with  the  ultimate 
consumer. 

Buying  Habits.  Buying  habits,  like  prejudices,  are  of  impor- 
tance to  the  seller  of  goods.  Increase  in  price  during  the  war  com- 
pelled marked  changes  in  many  buying  habits.     For  instance, 


214  MARKET  ANALYSIS 

the  results  from  sixty  grocers  interviewed  at  that  time  in  an  investi- 
gation of  the  Chicago  coffee  market,  were  as  follows: 

Changing  to  unbranded  bulk  coffee 20 

Changing  to  branded  {mckuge  coffee 6 

Unchanged  buying  customs 22 

Stores  not  noting  buying  habits 12 

The  majority  of  the  people  bought  the  better  brands  of  coffee, 
price  being  of  no  object  in  comparison  with  quality.  They  also 
found  it  to  be  true  that  nearly  one-third  of  the  buying  of  groceries 
was  done  over  the  telephone,  and,  therefore,  this  large  percentage 
of  buyers  could  not  be  reached  through  practical  demonstration 
of  a  product  at  the  store.  The  telephone  habit  is  an  innovation 
which  still  presents  varied  possibiHties  to  the  aggressive  merchant. 

Considerable  time  and  study  has  been  spent  on  the  subject 
of  buying  habits.  The  Crowell  Publishing  Company  conducted 
an  investigation  of  the  buying  habits  of  farmers.  An  amazing 
increase  was  found  in  the  number  of  farmers  who  are  now  buying 
in  the  largest  towns  in  their  counties  instead  of  at  the  small 
stores  near  their  farms.  Good  roads  and  the  automobile  are 
largely  responsible  for  this.  As  new  :i'oads  are  constructed,  the 
buying  radius  of  the  farmer  will  increase,  and  the  larger  towns 
will  benefit. 

In  this  same  investigation  it  was  found  that  not  more  than 
25  per  cent,  of  farmers  buy  merchandise  by  brand.  The  other 
75  per  cent,  take  the  product  recommended  by  the  dealer.  The 
isolation  of  the  farmer  seems  to  be  over,  and  his  former  buying 
habits  to  have  been  definitely  changed. 

Another  interesting  example  of  buying  habits  was  observed 
in  an  investigation  of  the  market  for  cotton  toweling.  The  work- 
ing class,  which  is  the  largest  potential  market  for  cotton  towehng, 
shows  less  and  less  inchnation  for  home  needlework.  House- 
wives have  less  leisure,  since  many  of  them  still  work  after  mar- 
riage. Thus  the  former  habit  of  making  up  towels  at  home  has 
been  changed  to  the  buying  habit  of  purchasing  towels  ready 
made.  It  is  obvious  how  important  this  Httle  discovery  was  for 
the  company  making  the  investigation. 

The  surveyor  should  study  habits  which  people  form  of  buying 
at  certain  hours.     For  example,  buying  hours  are  very  noticeable 


THE  ULTIMATE  CONSUMER  215 

in  department  stores,  where  sales  run  much  heavier  at  certain 
times,  and  these  times  may  vary  for  the  different  departments. 
There  are  also  days  in  certain  industries  on  which  sales  are  much 
larger.  The  fact  that  Saturday  is  the  customary  time  for  payment 
of  wages  plays  a  large  part  in  increasing  Saturday  afternoon 
patronage. 

"  From  birth  our  lives  are  largely  given  to  the  acquiring  of 
habits,"  says  the  Butterick  Publishing  Company. 

"  Commercially,  we  form  most  of  our  buying  habits  from  20 
to  40.     During  these  years  each  generation  decides  for  itself. 

"  The  habit  of  the  last  generation  of  the  '  Saturday  night 
bath '  is  displaced  evidently,  for  the  modern  hotel  advertises 
every  room  with  bath.  Perhaps  the  bathroom  fixture  people  did 
not  bring  this  change  about,  but  they  profit  by  it  enormously. 

"  Sunkist  wants  us  all  to  form  the  habit  of  using  more  lemon 
products  the  year  round.  If  they  can  form  a  new  habit  or 
strengthen  an  old  one,  they  will  sell  more  train  loads  of  lemons." 

In  general,  there  is  scarcely  a  habit  of  the  people,  no  matter 
how  trivial,  which  cannot  be  turned  to  commercial  account.  The 
surveyor  should  not  be  ashamed  to  stoop  to  a  consideration  of 
these  trifles,  which,  in  the  aggregate,  may  swell  into  an  immense 
influence  for  profit  and  loss. 

Occupation.  Almost  anything  which  can  be  definitely  estab- 
lished about  the  average  ultimate  consumer  is  worthy  of  con- 
sideration. In  what  way,  for  example,  might  his  occupation 
affect  the  sale  of  the  product.  In  some  cases  it  may  determine 
practically  the  entire  market,  while  in  others,  exercises  almost 
no  influence.  To  take  an  illustration  of  the  first  case,  suppose  it 
were  a  manufacturer  of  dental  supplies.  Then  it  is  evident  that 
the  consumers  will  belong  to  the  dental  profession,  and  further 
that  one  consumption  index  for  dental  supphes  would  be  the  num- 
ber of  dentists  available. 

Not  all  products  may  be  allocated  so  easily  according  to 
occupation.  What  the  consumer  does  for  a  living  may  have  little 
or  nothing  to  do  with  the  product.  Most  food  products  are  sold 
for  no  occupational  reasons.  Yet  there  are  well-known  exceptions 
to  this. 

Shoes  are  an  example  of  an  industry  where  occupation  plays 
a  part.     Military  shoes,  for  instance,  are  made  according  to  a 


216  MARKET  ANALYSIS 

certain  last.  Footwear  for  farmers  is  of  a  certain  type.  Golf, 
skating,  and  baseball  shoes  are  differentiated. 

Occupation  also  plays  a  part  in  the  market  for  clothing.  The 
sailor  has  special  clothes,  some  workers  wear  overalls  with  special 
pockets,  in  the  case  of  the  electrical  worker  for  pliers,  in  the  case 
of  the  carpenter  for  rule  and  pencil,  etc.  Occupation  also  has  a 
curious  tendency  in  respect  to  the  color  of  overalls.  Plasterers 
and  marketmen  wear  white  overalls,  railroad  men's  are  striped, 
teamsters'  are  brown,  while  machinists'  are  dark  blue. 

On  the  influence  w^hich  occupation  has  on  the  use  of  a  product 
the  Milwaukee  Journal  has  this  to  say  in  its  survey  of  the  tobacco 
field  in  ^Milwaukee.  Of  various  types  of  workers,  it  was  found 
that  the  man  who  worked  in  a  shop  was  a  larger  user  of  a  pipe, 
but  in  most  cases  smoked  cigars  after  working  hours.  The  office 
man  took  more  to  cigars,  and  the  outside  man  to  cigarettes. 

Here  again,  the  surveyor  should  not  be  above  a  study  of  the 
minutest  details.  The  average  cigar  store  sells  whatever  it  has 
to  whomever  asks  for  it.  But  an  investigation  of  this  subject 
showed  that  there  was  a  distinct  division  of  sales,  of  various  types 
and  prices,  and  that  these  divisions  corresponded  somewhat 
closely  to  occupational  groups.  A  study  of  the  various  groups 
served  to  visuaHze  the  average  customer  more  clearly,  and  such 
a  visuaHzation  led  to  increased  sales. 

Class.  There  are  certain  markets  which  are  not  bounded  by 
wealth,  but  rather  by  class.  As  examples  of  the  two  extremes 
might  be  cited  chewing  gum  and  chewing  tobacco  at  the  one 
end,  and  painting  and  statuary  at  the  other.  The  lover  of  books 
in  his  purchasing  is  not  influenced  by  wealth,  but  rather  because 
he  belongs  to  the  class  of  book  lovers. 

Class  does  not  mean  social  distinction  necessarily,  although 
it  may  do  so.  People  of  a  certain  social  standing  wear  "  clothes 
of  distinction."  Much  has  been  made  of  this  point  by  the  large 
clothing  houses,  who  have  capitalized  their  studies  of  class  differ- 
ences. These  distinctions,  however,  are  of  more  importance 
abroad  than  in  this  country,  where  practically  the  only  differ- 
entiating factor,  aside  from  wealth,  is  education. 

The  Chicago  Tribune  finds  that  demand  for  bulk  coffee  is  most 
common  among  medium  and  lower  class  people,  while  the  "Quality 
Group,"  an  association  of  magazines,  in  an  analysis  of  the  auto- 


THE  ULTIMATE  CONSUMER 


217 


mobile  market,  drew  up  the  accompanying  chart  Fig.  33,  show- 
ing the  relative  position  of  Fords  and  other  cars.  The  supposition 
is  that  Ford  owners  may  be  put  in  a  separate  class,  owning  47  per 
cent,  of  the  cars,  but  in  valuation  representing  but  20  per  cent.  An 
understanding  of  the  market  in  terms  of  class  plays  an  important 
part  in  most  merchandizing  problems. 

Expert  Knowledge.  The  necessity  for  acquiring  special  infor- 
mation before  being  able  to  use  a  product  has  often  proved  a  great 
hindrance  in  extending  its  market.     Usually,  if  the  need  for  the 


Fig.  33. 
Proportion  of  Ford  Cars — by  value.     Proportion  of  Ford  Cars — by  number. 
(The  Quality  Group.) 


product  exists,  the  number  of  people  acquiring  the  expert  knowl- 
edge necessarily  increases  rapidly.  This  has  been  the  case  with 
the  automobile.  A  few  decades  ago,  the  person  who  operated  an 
automobile  was  regarded  with  as  much  interest  as  now  is  given 
to  the  aviator. 

The  piano  is  an  example  of  a  product  in  the  use  of  which 
expert  knowledge  is  required.  The  same  is  true  of  other  musical 
instruments.  In  all  such  cases  the  market  is  limited  by  the 
number  of  people  with  ability  to  play  them.  This  docs  not  hold 
true  for  the  player  piano  and  phonograph,  in  the  operation  of 
which  no  skill  is  required.  No  sales  estimates  for  a  product 
requiring  expert  knowledge  can  be  complete  without  a  deter- 
mination of  the  extent  of  this  knowledge  among  potential  users. 

Literacy.     In  Chart  No.  34,  the  surveyor  may  see  how  the 


218  MARKET  ANALYSIS 

Southern  States  are  handicapped  by  illiteracy.  In  the  South 
15.6  per  cent,  of  the  population  cannot  read,  a  decidedly  limiting 
factor,  even  when  it  is  considered  that  the  purchasing  power  of  the 
negro  is  very  low. 

In  these  days  of  publicity  and  advertising,  the  consumer  who 
cannot  read  is,  in  one  sense  of  the  word,  isolated.  It  takes  special 
methods  to  gain  his  attention.  Ordinary  methods  of  advertising 
will  not  be  effective.  This  limitation,  however,  as  the  surveyor 
will  find,  is  of  much  less  importance  in  this  country  than  it  is 
abroad,  where  a  far  larger  percentage  of  the  population  can 
neither  read  nor  write. 

Amusements  and  Hobbies.     As  it  is  only  the  abnormal  indi- 


Stale  of  IOWA  ♦  .  .  [T 

V  I'/o 

"New  Lngland  States . 

^5.3% 

Entire  United  States . 

7.7% 

Southern  States  .  .  . 

I]15.6% 

Fig.  34.— Iowa's  lUit 

eracy  Rate  Contrasted  with  Other  Sections. 

(Chicago 

Tribune.) 

vidual  who  does  not  require  entertainment  and  amusement, 
there  is  always  a  great  potential  field  for  manufacturers  of  devices 
to  divert  people.  The  market  for  a  theatre  is  almost  strictly 
local.  But  the  market  for  a  moving  picture  film  is  not  only  local, 
national,  but  also  international.  Playing  cards,  golf  balls,  tennis 
balls,  chess  boards — all  these  are  forms  of  amusement  which 
have  definite  markets. 

If  the  surveyor,  by  any  chance,  is  investigating  a  product  such 
as  the  above,  he  may  expect  to  find  it  subject  to  the  same  rules 
and  laws  which  govern  any  other  product  to  be  marketed. 

General  Conclusions.  The  ultimate  consumer  is  the  final 
court  of  appeal.  Although  he  is  long  suffering  and  can  be  imposed 
on  for  a  time,  yet,  in  the  end,  he  is  inexorable.  The  average 
merchant,  unless  he  is  selling  direct  to  the  ultimate  consumer, 
does  not  have  a  very  definite  idea  about  him.  He  has  little  time 
for  such  things.  Although  it  may  seem  fooKsh  to  go  too  much 
into  detail  as  to  the  character,  habits,  and  peculiarities  of  the 
ultimate  consumer,  yet  a  knowledge  of  these  matters  often 
reveals  striking   facts.     Thus  a  knowledge  of  motives   of  pur- 


THE  ULTIMATE  CONSUMER  219 

chase  is  fundamental  to  an  accurate   phrasing  of  the   buying 
appeal. 

Anything  about  the  consumer  which  can  definitely  be  estab- 
lished is  important.  The  pettiest  trifles,  taken  in  the  aggregate, 
become  enormous.  The  surveyor  should  always  aim  to  find 
out  what  is  typical,  and  to  see  the  consumer  as  an  individual 
with  a  distinct  personality,  character,  and  even  appearance. 


CHAPTER  XIV 

THE  NATURE  AND   SIZE   OF  THE  MARKET 

Outline 
How  complex  is  the  market  for  this  product?  How  is  it  affected  by 

(a)  Transportation? 

(b)  Credits? 

(c)  Legislation? 

(d)  Competition? 

(e)  Distribution? 

(f)  Advertising? 

ig)  Human  element? 

How  large  a  territorial  extent  does  the  market  cover? 

(o)  Is  it  local,  or  semi-local? 

(6)  Is  it  state-wide  or  covering  a  group  of  states? 

(c)  Is  it  national? 

(d)  Is  it  international? 

How  is  the  market  divided? 

(a)  Is  it  in  groups? 
(6)  Is  it  scattered? 

Where  is  the  market? 

(a)  Is  it  urban? 

(6)  Is  it  rural? 

(c)  Is  it  urban  and  rural? 

What  proportion  of  the  population  use  the  product? 

(a)  What  is  the  per  capita  consumption? 

(b)  How  many  people  can  afford  to  buy  the  product? 

(1)  Within  what  income  range  does  the  purchasing  power  lie? 

(2)  If  product  were  cheapened  in  price,  would  market  be  enlarged 
materially? 

Is  it  possible  to  locate  markets  for  this  product  through  ownership  of  other 
commodities? 
(a)  Does  ownership  of  home  make  a  difference? 

220 


THE  NATURE  AND  SIZE  OF  THE  MARKET  221 

(b)  Does  ownership  of  automobile  give  any  assistance? 

(c)  Will  income  tax  returns  help? 

(d)  Must  population  be  Uterate? 

Are  there  any  available  data  which  may  be  used  as  an  index  in  computing 
extent  of  the  market? 

Is  the  market  affected  by  related  or  interdependent  markets? 


CHAPTER  XIV 
THE  NATURE  AND   SIZE  OF  THE  MARKET 

Having  considered  the  ultimate  consumers  as  individuals, 
we  must  now  study  them  in  the  aggregate.  We  are  here  not  so 
much  concerned  with  individual  preferences,  needs,  and  habits, 
as  with  the  group,  and  its  character,  considered  collectively. 

In  preparation,  the  surveyor  should  freshen  his  memory  as  to 
the  use  of  statistics,  since  this  approach  to  the  market  is  pri- 
marily of  a  quantitative  nature.  The  important  thing  to  bear  in 
mind  is  that,  regardless  of  the  figures  and  details  enshrouding 
them,  markets  are  basically  very  simple  phenomena. 

The  first  step  in  approaching  this  aspect  of  marketing  should, 
accordingly,  be  to  divest  it  of  its  complications  in  order  that  the 
market  problem  may  be  studied  in  its  bare  outlines. 

We  shall,  therefore,  begin  with  a  consideration  of  some  of  the 
things  which,  in  any  business,  are  Kkely  to  make  its  market  more 
complex. 

The  Complexity  of  Modem  Markets.  There  are  certain  fac- 
tors in  the  machinery  of  marketing,  in  competition,  distribution, 
and  market  demand,  which  tend  to  make  markets  complex. 
Following  are  some  of  the  most  important  of  these : 

1.  Transportation.  The  ever-increasing  volume  of  traffic 
greatly  complicates  the  marketing  problem.  The  railroad,  the 
steamer,  and  the  automobile,  all  innovations,  have  revolutionized 
and  are  still  revolutionizing  the  distributive  system  to  such  an 
extent  that  possible  markets  for  home  manufactures  have  become 
international.  The  invention  of  the  refrigerating  system  alone 
allows  the  whole  country  to  have  fresh  oranges  and  bananas. 
The  market  for  them  has  been  enormously  broadened.  What  is 
true  of  oranges  and  bananas  applies  equally  to  ahnost  any  other 
product.  Increased  facilities  of  transportation  allow  companies 
to  invade  markets  hitherto  inaccessible.  The  surveyor,  in  this 
connection,  should  learn  whether  his  company's  problems  are 

222 


THE  NATURE  AND  SIZE  OF  THE  MARKET  223 

handled  ty  the  most  up-to-date  transportation  methods  and 
should  study  especially  their  effect  upon  the  extension  of  its 
market. 

2.  Credits.  Since  the  days  of  barter,  the  credit  problem  has 
also  become  more  and  more  complex.  The  farther  away  the  con- 
sumer is  from  the  point  of  production,  the  more  difficult  does  this 
problem  become.  When  the  customer  is  in  a  foreign  country, 
it  is  still  more  difficult.  It  is  to  surmount  this  obstacle  that  we 
have  our  great  banldng  systems  with  branches  and  correspondents 
all  over  the  world.  The  credit  operation  is  one  which  has  a  very 
real  interest  for  the  surveyor,  since  it  is  supplementary  to  the  sales 
problem,  and  directly  affects  it. 

3.  Laws.  Each  state  and  country  lays  certain  restrictions 
upon  commerce,  even  to  the  extent  of  banning  an  article  entirely, 
or  making  the  tariff  charges  practically  prohibitive.  It  is  the 
state's  prerogative  to  regulate  commerce,  but  it  adds  another 
compHcating  factor  to  the  market  problem.  It  is  necessary  to 
know  where  the  products  may  not  be  sold.  Legislation  is  not 
always  a  hindrance.  It  is  of  direct  benefit.  Legislation  as  to 
public  water  supply  in  trains,  although  it  seemed  to  work  a  hard- 
ship upon  railroad  companies,  had  the  result  of  making  business 
good  for  manufacturers  of  paper  drinking  cups. 

4.  Competition.  Some  lines  of  business,  as  has  been  shown, 
tend  towards  concentration.  Ordinarily  this  process  affects  those 
lines  which  are  capable  of  international  distribution,  while  others 
are  distinctly  competitive.  For  instance,  the  automobile  industry 
seems  to  be  entering  upon  a  period  of  concentration.  Those 
industries  will  tend  towards  concentration  in  which  it  is  possible 
to  affect  material  economies  by  so  doing.  Where  the  supply  of 
raw  materials  is  equally  open  to  all  comers,  we  are  likely  to  have 
competition.  These  trends,  however,  are  difficult  to  analyze. 
Some  industries,  Hke  the  oil  industry,  have  shown  a  movement 
toward  concentration  and  a  reaction  away  from  it. 

This  factor,  complicating  the  problem  as  it  does,  is  of  such 
moment  that  it  will  doubtless  have  been  examined  in  detail. 
Statistics  on  this  question  arc  of  value  in  practically  every  market 
analysis. 

5.  Distribution.  Through  what  channels  the  manufactured 
goods  shall  be  brought  to  the  consumer  is  a  question  vitally 


224  MARKET  ANALYSIS 

affecting  the  market  problems.  Shall  the  middleman  be  elimi- 
nated? Each  manufacturer  must  decide  such  questions  for  himself. 
Some  products  lend  themselves  naturally  to  direct  distribution; 
othere  do  not.  Examples  will  be  found  in  the  chapter  on  the 
"  Industry  in  General."  Whether  they  do  or  not  can  be  pre- 
dicted with  reasonable  accuracy  only  through  research.  (See 
chapter  on  "  Distribution.") 

6.  Advertising.  The  immense  growth  of  national  advertising 
has  enabled  the  manufacturer  to  create  demand  simultaneously 
over  vast  expanses  of  territory.  So  great  is  the  effect  of  this 
factor  on  business  that  it  will  also  be  treated  at  length  in  a  later 
chapter. 

7.  Changing  Demands.  The  wants  of  the  public  are  con- 
stantly changing. 

It  has  taken  a  long  time  to  teach  this  lesson  and  even  now 
some  manufacturers  have  not  learned  it.  Although  you  may  be 
able  to  make  the  public  buy  by  advertising,  it  is  always  well  to 
consider  whether  it  would  not  be  easier  and  simpler  to  find  out 
in  advance  what  the  public  want,  and  then  give  it  to  them. 
Singer  sewing  machines  are  bought  because  people  want  them, 
and  they  will  buy  them  even  if  they  do  not  see  them  advertised 
in  magazines  and  newspapers. 

Only  the  company  which  is  in  line  with  the  times  can  get  the 
most  out  of  its  opportunities.  The  surveyor's  mission  is  to  keep 
his  finger  on  the  public  pulse  and  to  be  forearmed  against  vacilla- 
tions in  popular  requirements. 

With  a  thorough  understanding  of  the  complicating  factors, 
as  applied  to  his  business,  and  the  segregation  of  the  essential 
from  the  non-essential,  the  surveyor  is  ready  to  proceed  with  an 
examination  of  the  fundamentals. 

Ultimate  Consumers  Considered  as  a  Group.  What  is  the 
extent  and  size  of  the  market?  Is  it  local,  is  it  state-wide,  national, 
or  international?  Is  it  urban  or  rural?  Are  the  buyers  located 
in  groups  or  are  they  scattered? 

In  analyzing  a  market  it  is  necessary  not  only  to  consider 
the  buyers  themselves,  but  also  various  other  factors,  many  of 
them  being  of  a  purely  material  nature.  These  factors  will  not 
be  alike  in  any  two  market  problems.  A  survey  of  the  "  Chicago 
field  "  as  a  market  for  farm  tractors,  however,  made  by  the 


THE  NATURE  AND  SIZE  OF  THE  MARKET  225 

Chicago  Tribune,  will  give  an  idea  of  the  variety  of  considerations 
encountered.     See  Fig.  35. 

It  was  necessary  in  this  survey,  First,  to  study  the  nature  of 
the  soil,  its  fertility  and  character.  Second,  it  was  shown  that 
this  territoiy  had  one-fifth  of  the  wealth  of  the  country,  although 
comprising  but  one-eleventh  of  its  area.  Third,  the  research 
revealed  that  this  territory  produced  one-third  of  the  gas  engines 
of  the  United  States,  while  about  one-fifth  of  its  automobiles  were 
owned  there.  Fourth,  a  study  of  the  labor  situation  showed  that 
there  was  a  shortage  of  man  power.     (Obviously,  the  farmer  must 


Fig.  35. — Map  Showing  Geographical  Location  of  Buyers.    (Chicago  Tribune.) 

either  be  able  to  hire  labor  cheap,  or  he  must  rely  on  labor-saving 
devices.)  Fifth,  the  crops  were  found  to  be  of  such  a  nature  that 
they  required  the  plowing  of  a  large  acreage.  Sixth,  the  size  of 
farms  was  studied,  to  ascertain  whether,  on  the  average,  they 
were  large  enough  to  afford  tractors.  Seventh,  more  tractors 
had  been  sold  in  this  territory  than  in  any  other  section  of  the 
country,  so  that  special  knowledge  as  to  their  operation  was  fairly 
common. 

It  will  be  seen  that  each  of  the  above  points  plays  an  important 
part  in  the  problem.  There  is  not  one  which  the  surveyor  can 
afford  to  ignore.  Yet  it  is  not  sufficient  to  treat  of  such  matters 
in  a  purely  qualitative  manner.  In  any  market  analysis  facts 
and  figures  are  of  value  only  when  they  are  accurate  and  are  known 


226  MARKET  ANALYSIS 

to  be  accurate.  Errors  are  fatal  to  the  success  of  the  survey,  and 
are  Hkely  to  cost  the  company  a  large  financial  loss. 

Figures,  of  course,  are  dangerous.  The  man  who  makes  mar- 
ket analyses  by  merely  jumping  at  conclusions  is  a  liability.  It 
is  easy  to  reckon  that  there  are  nine  million  automobiles  in  the 
United  States,  and  that  as  each  of  them  requires  four  tires  a  year 
the  annual  market  for  tires  is  36,000,000.  But  no  market  analysis 
problem  is  quite  so  simple.  More  complete  figures  are  necessary. 
There  are  exceptions  to  be  made  and  errors  to  be  allowed  for. 
The  computation  of  the  extent  of  a  market  cannot  be  made  on 
the  back  of  an  envelope. 

For  a  retail  business,  the  geographic  extent  of  a  market  can 
be  shown  wath  some  accuracy  on  a  map.  Such  a  map  is  illus- 
trated in  Fig.  36,  show^ing  Boston's  shopping  zones.  It  wiU  be 
seen  from  this  that  distance  from  the  center  of  the  shopping 
zone  has  important  bearing  on  the  frequency  of  purchasing. 
Fig.  37  shows  interlocking  market  zones  in  the  state  of 
Massachusetts. 

The  consideration  of  the  consumer  as  a  group  is  just  as  impor- 
tant as  the  previous  discussion  of  him  as  an  individual.  In  the 
latter  case,  the  surveyor's  task  is  largely  statistical.  He  should 
be  able  to  make  up  charts  similar  to  those  illustrated  in  this 
chapter.  In  all  this  section  of  the  work,  however,  the  surveyor 
must  take  the  utmost  care  to  avoid  inaccuracy  in  figures. 

Sources  of  Market  Information.  Whereas  the  competitors, 
dealers,  and  middlemen  will  have  much  information  to  con- 
tribute about  the  product  and  the  company  and  the  industry,  when 
it  comes  to  obtaining  information  about  the  market,  its  character 
and  extent,  the  surveyor  can  get  much  help  from  statistics.  For 
example,  there  are  certain  types  of  statistics  which  recur  in  a  great 
many  market  investigations,  such  as  the  study  of  population  and 
the  study  of  wealth,  and  these  are  a  part  of  the  stock  in  trade  of 
the  professional  market  counselor. 

As  to  the  sources  from  which  statistics  may  be  secured,  the 
surveyor  will  have  to  depend  on  his  ingenuity.  Nothing  more 
than  an  outline  can  be  given  here,  for  the  reason  that  the  special- 
ized sources  are  so  numerous  as  to  preclude  mention,  and  that 
these  sources  are  constantly  changing.  The  Government  is,  of 
course,  the   great  fund  of  general  information,  not  only  in  the 


THE  NATURE  AND  SIZE  OF  THE  MARKET  227 

various  reports,  but  in   figures   on   special   industries   which   it 
publishes  from  time  to  time. 


THIS  MAP  OF  BOSTON'S  SHOPPING  ZONES 


was  prepared  by  the  advertising  mana- 
gers of  three  of  the  largest  Boston 
stores  and  approved  by  the  Boston 
Chamber  of  Commerce.  ^  r ,- 


^..r..         C 


Fig.  36.— (Editor  and  Publisher) 


One  of  the  best  things  for  the  surveyor  to  do  is  to  go  to  a 
large  library  and  get  up  a  bibUography  of  books  on  the  subject 
being  investigated.     Another  plan  is  to  write  to  the  trade  journals 


228 


MARKET  ANALYSIS 


and  trade  associations  which  frequently  have  more  or  less  thorough 
compilations  of  data  concerning  the  industry. 


Fig.  37.— (Editor  and  Publisher) 

Population.  Of  the  general  statistics,  appljdng  to  many 
markets,  those  concerning  population  are  the  easiest  to  obtain 
and  often  the  most  important.    Markets  in  the  final  analysis 


THE  NATURE  AND  SIZE  OF  THE  MARKET 


229 


are  people,  individuals.     We  can  find  out  much  about  consumers, 
if  we  set  about  making  a  fairly  thorough  study.     Nor  should  we 


Yic.  37a. — (Editor  and  rublisher) 

despise  libraries  and  scientific  treatises  merely  because  the  average 
business  man  rarely  has  recourse  to  them. 

If  we  arc  planning  to  make  a  study  of  the  market  for  overalls 


230  MARKET  ANALYSIS 

in  a  textile  community,  we  must  examine  the  number  of  mill 
workers  there,  their  average  wage,  their  average  family,  the  num- 
ber owning  their  own  homes,  the  foreign  element,  etc. 

Studies  of  this  nature  have  become  more  and  more  common. 
The  New  Orleans  Item,  in  making  a  survey  of  its  territory  for 
baking  powder,  made  the  interesting  discovery  that  the  con- 
sumption of  pastiy  there  per  capita  was  greater  than  in  any  other 
American  city  except  New  York.  It  was  found  that  the  increase 
in  the  chain  system  of  bakeries  had  to  some  extent  been  respon- 
sible for  this  fact.  The  point  is  that  this  discovery  was  of  para- 
mount importance  to  a  newspaper  which  was  attempting  to  show 
baking  powder  manufacturers  the  importance  of  advertising  their 
product  in  its  particular  territory. 

Calculations  of  per  capita  consumption  are,  of  course,  very 
common.  The  Milwaukee  Journal  computes  that  the  average 
person  in  its  territory  eats  10.2  packages  of  cereal  per  year.  Other 
market  comparisons,  with  population  used  as  a  basis,  are  shown 
in  Fig.  38.  But  population  figures  are  of  themselves  likely  to 
prove  misleading.  There  are  few  commodities  used  by  the  entire 
population.  Markets  for  the  majority  of  goods,  even  foodstuffs, 
are  restricted,  either  geographically,  or  by  class,  or  otherwise. 
Here  again,  the  surveyor  must  keep  in  mind  the  importance  of 
comphcating  factors,  and  the  extent  of  their  effect  upon  his 
problem. 

Concentration  of  buying  power  is  a  subject  which  has  been 
given  much  attention  by  pubHshers  of  magazines  which  cater  to 
the  wealthier  classes.  The  editor  of  one  of  the  Nast  Pubhcations, 
for  example,  has  shown  how  buying  power  is  highly  concentrated 
in  certain  homes.  The  Department  of  Labor,  he  points  out,  has 
estimated  that  the  average  family  in  the  United  States  which  has 
an  income  of  between  S1800  and  $2100  spends  about  $610  for 
food.  This  average  family  is  composed  of  4.5  persons.  But  the 
so-called  "  Nast  family,"  w^hile  it  has  only  four  persons,  usually 
supports  two  servants  and  two  guests.  This  brings  the  size  of 
this  family  up  to  eight,  or  nearly  twice  the  size  of  the  "  average  " 
family.  Families  of  this  type,  according  to  the  editor,  have 
incomes  of  $8000  or  more  a  year,  or  four  times  as  much  as  that 
of  the  average  family;  so  that  they  can  afford  to  buy  a  much 
higher  quality  of  food,  and  also  larger  quantities  of  it. 


THE  NATURE  AND  SIZE  OF  THE  MARKET 


231 


ZOKSSS 

TOTAU 
.POPUIATKN 
6  STATES 


Comparison  of  The  Chicago  Territory  (Illinois,  Indiana,  Iowa, 
Michigan  and  Wisconsin)  with  other  sections  of  the  United 
States  and  Canada. 

CITY  OP  CHICAGO 

200  SQUARE.  MILES 
2.500000  POPUIATIOM 


Comparison  of  area  and  population  of  the  City  of  Chicago  with 
area  and  population  of  seven  western  states. 

Fia.  38. — Market  Comparisons,  with  Population  Used  as  a  Basis.      (Chicago 

Tribune.) 


232  MARKET  ANALYSIS 

Mr.  E.  W.  Bachman,  of  the  "  Qiialit}^  Group,"  follows  a  similar 
line  of  reasoning.  He  has,  bj'-  a  study  of  income  tax  returns, 
ascertained  that  the  wealthiest  general  market  in  the  countrj^  is 
composed  of  618,000  incomes  of  $4000  or  more.  With  these 
figures  as  a  basis,  he  has  worked  out  a  low  limit,  or  "  bottom  " 
of  the  market  for  expensive  products — that  is,  the  lowest  income 
which  will  permit  the  purchase  of  the  product. 

Before  the  surveyor  can  make  accurate  computations,  he  must 
have  the  population  figures  as  a  basis.  The  application  of  all  the 
other  factors  limiting  the  consumer  as  a  group  is  dependent  on 
this  primary  knowledge.  When  the  surveyor  can  answer  the 
question  of  how  many  people  there  are  in  my  market,  he  is  ready 
to  go  on  with  the  other  factors  which  eliminate  certain  sections 
of  the  population. 

Purchasing  Power.  It  is  necessary  not  only  to  learn  how 
many  people  will  buy  the  product,  but  how  much  money  they 
have  to  spend.  This  question  of  purchasing  ability  takes  us 
considerably  farther  than  questions  of  per  capita  consumption. 
We  invariably  study  population  in  the  light  of  wealth.  This  will 
immediately  eliminate  a  large  proportion  of  purchasers,  so  far 
as  most  commodities  are  concerned. 

It  is  easy  to  confuse  readiness  to  purchase  with  abihty  to 
purchase.  A  market  survey  may  show,  from  actual  interviews 
with  prospective  consumers,  that  there  is  a  large  market  for  some 
new  product,  but  when  it  comes  to  the  point  of  actually  parting 
with  their  money  a  great  many  of  those  who  had  expressed  a 
desire  for  the  article  will  fail  to  purchase.  In  estimating  mar- 
kets on  the  basis  of  such  information,  the  surveyor  should  pro- 
tect himself  by  allowing  a  liberal  factor  of  safety. 

It  makes  no  difference  whether  there  are  ten  million  people 
who  desire  player  pianos,  if  the  ability  to  buy  is  confined  to  one 
hundred  thousand  of  them.  Such  limitations  are  met  by  manu- 
facturers in  various  ways.  In  merchandising  shoe  machinery, 
for  example,  only  a  certain  percentage  are  possible  purchasers, 
because  the  rest  cannot  afford  the  price.  It  would  be  poor  policy 
to  sell  machines  to  such  prospects,  because  they  could  not  afford 
to  pay  for  them.  As  an  alternative,  the  machines  are  leased  to 
them  on  a  royalty  basis. 

Again,  there  are  other  expedients.     When  a  company  finds 


THE  NATURE  AND  SIZE  OF  THE  MARKET 


233 


it  has  exhausted  its  market  at  the  price  originally  demanded  for 
its  product,  recourse  is  often  had  to  cheaper  materials,  and  an 
appeal  made  to  a  lower  grade  of  market,  thus  enlarging  the  scope 
for  sales.  Publishers  of  popular  novels  do  this  as  a  regular  prac- 
tise, getting  out  a  cheap  reprint  edition  as  soon  as  danger  of 
affecting  the  sale  of  the  early  and  expensive  editions  has  passed. 
Purchasing  power  is  a  necessaiy  study  in  any  computation 
of  the  market.  It  is  a  definite  and  usually  unchangeable  factor 
of  limitation.  The  only  lasting  way  the  company  can  cc  pe  with 
this  limitation  is  by  reducing  its  price.     Some  choose  to  keep 


92% 
56% 
52% 
52% 
50% 
48% 
44% 
40% 
36% 
Z>5% 
35% 
31% 
25% 
24% 


Telephones 


Pianos 


A-utcmobiles 


VeiLCuum  Cleaners 


Imprc'ved  Heating  Plants 


PowerWashers 


E/lec.  or  Gas  Lt. 


Runnings  Water 


Refhgeractors 


Oil  Cook  Stoves 


Bath  Tubs 


Sleeping  Porchesf 


Electric  or  Gas  lroD5 


Indoor  Toilets  I 


Fig.  39. 


-Buying  Power  of  an   Iowa   Home,   as   Indexed   by  its   Modern 
Improvements.     {Chicago  Tribune.) 


their  prices  low  and  to  cater  to  a  large  market;  others  to  keep 
prices  high  and  to  appeal  only  to  an  exclusive  clientele. 

The  surveyor  has  several  sources  of  information  as  to  the  pur- 
chasing power  of  a  given  market.  Income  tax  returns  are  one 
source,  and  there  arc  other  evidences.  The  ownership  of  other 
goods  and  chattels  may  be  taken  as  another  indication.  The 
purchasing  power  of  a  home  in  Iowa  has  been  estimated  by  such 
a  method,  and  the  results  are  tabulated  in  Fig.  39. 

The  ownership  of  homes  is  often  taken  as  an  evidence  of  pur- 
chasing power.  It  has  been  stated  that  of  the  population  of  Iowa, 
57  per  cent,  own  their  own  homes,  while  in  Massachusetts  the 
percentage  is  only  32,  and  in  New  York  30.  The  same  authority 
states  that  one  family  out  of  every  two  owns  an  automobile. 
These  facts  should  not  be  misconstrued,    They  indicate  an  even 


234  MARKET  ANALYSIS 

distribution  of  wealth,  more  than  anything  else.  There  are  other 
communities,  such  as  India,  where  the  per  capita  buying  power 
is  very  low,  and  yet  where  there  are  many  exceedingly  wealthy 
indi\aduals,  numerically  considered. 

Literacy  may  be  considered  as  another  index  of  purchasing 
power,  as  mentioned  in  the  previous  chapter.  A  good  education, 
and  high  standards  of  living,  bespeak  the  man  or  woman  who 
demands  the  best.  In  a  certain  farm  community,  22  per  cent, 
of  the  inhabitants  who  had  had  common  school  educations  had 
bathrooms,  while  27  per  cent,  of  those  with  high  school  educations 
had  their  houses  so  equipped.  Among  the  college  graduates,  the 
proportion  amounted  to  48  per  cent.  Similar  percentages  were 
noted  when  other  so-called  luxuries  were  studied.  The  surveyor 
must  take  these  instances  merely  as  suggestive.  Each  business 
has  its  own  best  market  index,  and  it  is  the  surveyor's  task  to 
work  out  that  index  as  best  he  may. 

Market  Indices.  In  estimating  the  potential  market  for  any 
conmaodity  or  service,  the  sm-veyor  may  often  make  use  of 
statistics  already  compiled  or  readily  available.  The  most  helpful 
information  is  obtained  by  selectmg  some  group  of  statistics,  the 
connection  of  which  with  the  product  is  known,  and  from  them 
computing  the  potential  market  for  the  product.  For  instance,  the 
potential  sale  of  electric  flat  irons  is  dependent  upon  the  nimiber 
of  houses  wired  with  electricity.  By  taking  the  figures  for  elec- 
trically wired  houses,  the  surveyor  will  have  one  index  of  the 
maximum  market  for  electric  irons. 

Theoretically,  there  is  at  least  one  index  for  every  conomodity. 
Actually,  it  is  seldom  easy  to  find  a  single  index  which  is  accurate. 
There  are  complicating  factors  and  statistics  impossible  to  get. 
Usually  there  is  more  than  one  index,  and  the  attempt  should  be 
made  to  obtain  indices  which  both  supplement  and  check  each 
other.  For  example,  one  index  of  the  market  for  automobiles 
might  be  the  miles  of  good  road  per  inhabitant  of  a  certain 
district.  Yet  it  might  also  be  a  line  drawn  by  per  capita  wealth 
or  income  tax  returns,  some  means  by  which  the  wealth  of  the 
average  individual  might  be  computed.  Neither  index  alone 
would  be  accurate,  while  the  two  might  be  utilized  in  an  equation  that 
would  work  out  satisfactorily.  The  inadequacy  of  using  only  a  single 
factor  as  such  an  index  may  be  obsei-ved  by  reference  to  Fig.  40. 


THE  NATURE  AND  SIZE  OF  THE  MARKET 


233 


Car  Distribution  Not  Uniform 

The  total  road  mileage  of  the  United  States  outside  in- 
corporated to\viis  and  cities  is  about  2,456,000  miles.  With  a 
total  registration  of  6,146,617  motor  vehicles  there  was,  there- 
fore, an  average  of  2.5  motor  cars  for  every  mile  of  public  road 
in  the  United  States.  The  distribution  of  cars  among  the 
several  states,  however,  is  far  from  uniform.  Thus,  Nevada 
has  but  2  cars  to  evei-y  3  miles  of  road,  while  Rhode  Island  has 
16  cars  to  each  mile  of  rural  road.  Furthermore,  while  there 
was  an  average  of  1  motor  car  registration  for  every  16  persona 
in  the  United  States,  in  the  States  of  California  and  Nebraska 
there  was  1  car  for  eveiy  7  persons,  and  1  car  for  every  8 
persons  in  Iowa  and  South  Dakota,  but  only  1  car  for  every 
61  persons  in  Alabama,  every  46  in  Louisiana,  or  every  42  per- 
sons in  Arkansas. 


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JICOOO.OOO 

2,500,000 
i400,000 
2,300.000 
2.200.000 
2.100,000 

25,000,000 
24,000.000 
23,000,000 
22,000,000 
21,000,000 

T 

■::::!::i::::::: 

IS0.00O.OO0 
180.000.000 

no.ooo.ooo 

1.900.000 
1.800,000 
1.700,000 

19,000,000 
18,000,000 
17,000,000 
16,000,000 
15.000,000 
14,000.000 
I3.000.OOS 

■Ld'nnnnool  ■>""""'> 

140^000,000 
130,000,000 

I.4OO.00O 
1,300.000 

::: 

llllllitllMPl 

"t 

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II '. 

1  + 

110,000,000 
100,000,000 
30,000  000 

1,100,000 
1,000,000 
900,000 
800,000 
700,000 

(00,000 

500,000 
400,000 
300,000 
200.000 
100.000 

11,000,000 
10.000.000 
9.000.000 
I.OOOOOO 
7,000,000 
U00,000 
5,000,000 
4,000,000 
3.000,000 
2,000,000 
1,000,000 

[■-'■ 

::::;  : 

:         iii:ir::i:;!:ii:ii:ii:::::i 

- 

SO.000,000 
10,000,000 
60.000,000 
50,000,000 
iO.000.000 
30.000,000 

-4 

----;■ :::-::- 

I         -']'l::\[l\:::::\:::::i:::: 

- 

Vii: 

■■■- 

:     ;;;;;;;;;;;:;:;;;:;;;;:;;;;; 

i 

u.  000,000 

10.000.000 

Fig.  40. — Chart  Showing  Inadequacy  of  a  Single  Index. 
mobile  Chamber  of  Commerce.) 


{National  Aulo- 


^6  MARKET  ANALYSIS 

A  maniifactiirer  of  filing  cabinets  adopted  a  highly  ingenious 
scheme,  devised  by  IVIr.  Webster  of  the  George  Batten  Company, 
for  calculating  his  market  by  means  of  the  number  of  stenographers 
and  bookkeepers  in  the  city.  He  allowed  one  filing  cabinet  for  a 
certain  number  of  clerical  workers,  having  found  by  experiment 
that  this  was  a  fairly  accurate  measure. 

Such  market  indices  are  likely,  indeed,  to  be  misleading,  unless 
their  adequacy  has  not  been  tested  out  by  actual  trial.  One 
might  suppose,  offhand,  that  density  of  population  was  an  index 
for  the  hotel  business.  This  is,  however,  an  unsafe  guide.  States 
with  large  negro  population  do  not  come  up  to  the  average,  while 
states  with  good  roads,  like  California,  seem  to  show  up  unusually 
well.  States  with  large  cities  do  a  big  hotel  business.  Cities 
on  the  other  hand,  like  Newark,  New  Jersey,  and  Providence, 
R.  I.,  which  are  near  a  metropolis,  rarely  support  the  usual  quota 
of  first-class  hotels. 

In  many  cases,  the  surveyor  must  concern  himself  with  both 
original  and  replacement  markets.  For  instance,  the  manu- 
facturer of  shoe  laces  would  estimate  his  original  market  on  the 
number  of  shoes  manufactured,  this  being  his  index  of  the  market. 
But  it  will  be  a  harder  matter  to  find  an  index  for  the  market  for 
shoe  laces  which  are  put  into  old  shoes. 

New  indices  are  constantly  being  tried  out  for  markets.  A 
telephone  company  used  the  amoimt  of  paint  sold  as  an  index. 
The  farmer  who  painted  his  house  was  Hkely  to  want  a  telephone. 

In  such  work,  however,  the  only  test  for  a  seemingly  suc- 
cessful index  is  the  test  of  time.  Merely  because  an  index  is 
accepted  by  a  sales  manager  as  a  basis  for  his  quotas,  and  because 
his  force  has  lived  up  to  these  quotas,  does  not  prove  that  the 
index  is  a  fair  one.  Just  because  the  farmer  has  not  painted  his 
house  is  no  reason  why  he  cannot  be  sold  a  telephone.  Such  an 
index  should  only  be  taken  by  and  large,  and  not  as  applied  to 
the  individual  case. 

Location.  Markets  in  some  cases  are  distinctly  limited  terri- 
torially. For  example,  the  market  for  the  local  newspaper  is 
restricted  to  the  urban  district  and  to  the  territory  immediately 
Contiguous.  It  can  rarely  hope  to  have  a  very  wide  circulation 
because  it  cannot  appeal  to  an  audience  not  interested  in  local 
affairs. 


THE  NATURE  AND  SIZE  OF  THE  MARKET  237 

Magazines  and  trade  papers  are  to  a  considerable  extent 
exempt  from  this  localizing  influence.  In  the  former  case  they 
are  national  in  distribution;  in  thf-  latter  case  they  are  limited  to 
the  trade,  which  may  or  may  not  be  national.  Some  farm  papers 
aim  at  nation-wide  circulation;  others  aim  to  be  local. 

Retail  stores  vaiy  in  the  territorial  extent  of  their  market. 
For  instance,  the  butcher  shop  and  the  corner  grocery  store  have 
distinctly  limited  territories.  The  department  store  has  a 
wider  territory. 

The  manufacturer  may  or  may  not  be  limited  territorially. 
It  depends  on  his  size,  in  his  product,  and  on  his  distributive 
faciHties,  as  weU  as  upon  other  factors.  The  manufacturers  of 
ice  cream  are  confined  territorially  by  transportation  limitations. 
A  point  is  reached  beyond  which  it  is  not  profitable  to  attempt 
competition  with  products  nearer  that  market.  Bread,  for 
instance,  is  a  product  in  which  the  margin  of  profit  is  very  close 
and  it  is  not  possible  to  reduce  expenses  to  the  point  of  entering 
competitive  fields,  unless  they  are  near  home. 

The  development  of  refrigeration  has  extended  the  markets 
for  perishable  foodstuffs.  Even  then,  the  market  is  limited  terri- 
torially by  the  length  of  time  the  product  can  be  kept.  Peaches, 
for  instance,  ought  not  to  be  on  the  road  more  than  three  days, 
even  in  refrigerated  cars.     Oranges  will  stand  a  much  longer  trip. 

Thus,  before  making  any  recommendation  as  to  the  extension 
of  sales  fields,  the  surveyor  should  make  sure  that  the  market 
has  not  certain  inherent  and  inflexible  boundaries.  The  money 
required  to  enlarge  the  territorial  extent  of  the  market  might 
better  be  applied,  perhaps,  to  its  intensive  cultivation.  Limita- 
tions, other  than  those  of  a  territorial  nature,  will  be  treated 
of  in  the  next  chapter. 

Related  Markets.  Business  has  become  so  complex,  and 
various  industries  are  so  interdependent,  that  the  surveyor  will 
do  well  to  extend  his  study  beyond  that  of  the  market  for  his 
particular  commodity.  He  can  often  check  up  his  results  by  an 
examination  of  allied  markets.  In  the  textile  soap  industry,  the 
market  for  woolens  has  a  decisive  influence  on  soap  sales.  If  the 
mills  are  inactive  through  lack  of  demand,  there  is  a  consequent 
inactivity  at  the  soap  factory.  Figures  on  the  wool  industry  are 
easy  to  obtain,  and  arc  thus  of  value  to  the  student  of  textile  soap. 


238  MARKET  ANALYSIS 

This  same  close  relation  is  shown  in  all  industries  dependent 
on  other  industries  for  their  prosperity.  It  is  true,  therefore, 
in  the  automotive  accessory  business  and  the  tire  industry, 
that  when  the  market  for  automobiles  becomes  inert,  the  support 
is  also  gone  from  the  accessoiy  business.  That  is,  the  same  factors 
which  tend  to  disrupt  the  parent  industry  will  have  a  similar 
effect  on  the  dependent  industries. 

It  is  out  of  the  question  to  study  all  related  markets.  In  some 
cases,  such  as  in  the  coal  market  and  the  steel  market,  there  is  a 
tendency  for  both  to  rise  and  fall  together,  on  account  of  the  great 
use  of  coal  in  the  steel  industry.  Related  markets  are  most  valu- 
able to  the  surveyor  in  the  event  that  such  a  direct  connection 
can  be  traced. 

On  the  other  hand,  the  surveyor  should  not  place  entire 
dependence  upon  his  neighbor's  prosperity.  The  fact  that  since 
related  business  is  encountering  depression  may  not  mean  that 
his  own  sales  must  faU  correspondingly.  He  should  remember 
that  one  of  the  best  results  of  market  survey  work  lies  in  the 
stabilization  of  output. 

Methods  of  Approaching  Markets.  The  way  in  which  a  com- 
pany attempts  to  reach  its  market  depends  on  the  nature  of  the 
product  and  the  character  of  the  market,  territorially  and  indi- 
vidually. Who  is  going  to  use  this  product?  If  it  is  a  cotton 
spindle,  the  surveyor  knows  that  the  market  will  be  foimd  in  the 
cotton  mills,  while  if  it  is  a  hair  brush,  the  surveyor  knows  that 
nearly  every  man,  woman,  and  child  in  the  country  will  use  one. 
In  the  case  of  the  spindle,  there  is  a  very  definite  problem  of 
reaching  the  purchasing  agent  at  the  mill.  In  the  case  of  the  hair 
brush,  there  is  the  infinitely  broader  problem  of  reaching  the 
population  of  the  United  States. 

Does  the  consumer  need  the  article  that  the  company  is  trying 
to  sell  to  him?  It  is  rather  hard  to  define  what  a  man  needs.  He 
may  hardly  be  able  to  make  existence  bearable  without  tobacco. 
He  may  need  a  piano,  or  an  automobile,  or  a  silk  hat,  if  he  is  a 
pianist,  an  automobile  salesman,  or  an  undertaker.  What  is  a 
necessity  to  one  may  be  valueless  to  another. 

Considering  wants,  many  people  do  not  want  certain  articles 
until  after  they  have  seen  them.  A  child  does  not  need,  or  even 
want,  a  gyroscopic  top  if  he  has  never  seen  one,  but  the  minute 


THE  NATURE  AND  SIZE  OF  THE  MARKET  239 

he  has  seen  one,  he  is  apt  to  consider  it  an  absolute  necessity.  It 
is  a  trait  of  human  nature  recognized  by  salesmen  that  if  a  want 
can  be  made  acute  enough  a  person  will  buy  regardless  of  whether 
he  can  really  afford  it  or  not.  Many  individuals  have  mortgaged 
their  homes  in  order  to  obtain  automobiles.  There  are  com- 
panies the  exclusive  business  of  which  is  financing  persons  who 
wish  to  buy  automobiles  on  a  credit  basis. 

The  surveyor  will  have  to  make  several  classifications  in  this 
connection.  He  will  have  to  decide  whether  the  article  is  an 
actual  necessity  like  salt  or  sugar  or  flour;  an  acquired  necessity, 
such  as  tea,  coffee,  and  tobacco,  or  an  apparent  necessity,  that  is, 
an  article  which  the  person  thinks  he  cannot  get  along  without 
and  which  is,  therefore,  apparently  a  necessity  to  him. 

The  approach  to  markets,  in  general,  will  be  treated  in  the 
following  chapters. 

General  Conclusions.  By  this  time  it  may  seem  to  the  sur- 
veyor that  he  has  been  wandering  in  a  labyrinth.  However,  he 
will  have  established  his  ability  if  he  has  been  able  to  keep  his 
bearings.  But  it  is  essential  for  him  to  pause  periodically  and  take 
counsel  with  himself,  to  order  his  work,  and  to  compare  it  with 
the  campaign  as  mapped  out  in  the  beginning.  Thoroughness 
is  as  important  in  commercial  as  in  any  other  research  work,  and 
is  perhaps  more  difficult  of  attainment  on  account  of  the  multi- 
phcity  of  variations  and  uncertainties.  But  it  is  only  by  combing 
through  every  possible  source  that  he  has  any  surety  of  running 
across  the  bit  of  information  which  may  perhaps  act  as  a  magic 
wand,  converting  mere  prospects  into  paying  customers. 

Despite  the  importance  of  examining  even  the  slightest  detail, 
there  is  the  coequal  necessity  for  paring  down  problems  to  their 
very  lowest  terms.  In  this  chapter,  the  attempt  has  been  made 
to  show  the  surveyor  how  he  should  eliminate  the  complexities 
and  leave  standing  only  the  true  essentials. 

But  the  structure  of  markets  is  not  solid.  Markets  arc  plastic. 
They  are  restless,  yielding,  changing.  The  demand  of  today  is 
gone  tomorrow.  The  surveyor's  task  is  never  really  completed 
until  the  company  closes  its  books. 


CHAPTER  XV 

THE    POTENTIALITIES    AND    LIMITATIONS    OF 
THE  MARKET 

Outline 

Where  do  the  best  opportunities  lie  for  extending  the  company's  markets? 

(a)  Are  they  through  exploitation  of  undeveloped  fields? 

(6)  Are  they  in  entering  fields  already  occupied  by  competitors? 

What  are  the  factors  necessary  for  computing  potential  markets? 

(a)  The  original  market. 

(1)  Who  are  the  actual  users  of  such  products  at  present? 

(2)  Who  are  the  logical  users  of  such  products? 

(b)  The  replacement  market. 

(1)  What  is  the  life  of  the  product? 

(2)  How  many  people  are  actually  using  this  product  now? 

(3)  What  use  does  the  product  receive,  and  how  often  is  it  used? 

What  are  the  chief  factors  which  limit  the  market?   What  is  the  effect  of 

(a)  Price. 

(1)  At  what  price  is  the  bulk  of  the  product  sold? 
(a)  Is  this  price  determined  by  competition? 
(6)  Is  it  influenced  by  custom? 
(c)  What  other  factors  help  determine  the  price? 
(6)  Fashion. 

(1)  How  quickly  do  market  requirements  change  because  of  style? 
(a)  Is  change  rapid,  as  in  millinery? 
(6)  Is  it  slow,  as  in  furniture? 

(c)  Cost  of  operation. 

(1)  What  part  does  economy  in  operation  play? 

(2)  What  is  the  percentage  of  repairs  necessary  as  compared  with 
other  competing  products? 

(3)  How  much  attention  must  be  paid  to  it? 

(d)  Seasonal  factors. 

(1)  Is  seasonal  fluctuation  of  demand  unavoidable? 

(2)  Is  it  susceptible  of  correction? 

(3)  Are  foreign  outlets  a  solution? 

240 


THE  POTENTIALITIES  AND  LIMITATIONS  241 

(e)   Climate  and  weather. 

(1)  Do  they  restrict  use  of  article  partially  or  entirely? 

(2)  Do  they  necessitate  the  use  of  different  articles  in  summer  and 
winter,  such  as  lubricating  oils,  overcoats,  etc.? 

(/)    The  second-hand  market. 

(1)  To  what  extent  does  demand  for  the  used  product  affect  the 

market,  and  why? 

(a)  Is  it  because  of  lower  price  of  second-hand  article? 

(6)  Is  it  because  second-hand  article  gives  adequate  service? 
(g)  Government  restrictions. 

(1)  Are  these  imposed  because  of  nature  of  the  product? 

(2)  Are  they  tariff  restrictions? 

(3)  What  effect  do  licenses  have  on  the  market? 

What  effect  do  periods  of  prosperity  and  depression  have  on  the  market? 


CHAPTER  XV 

THE   POTENTIALITIES    AND    LIMITATIONS    OF 
THE  MARKET 

The  market  has  hitherto  been  considered  in  relation  to  the 
unit,  that  is,  the  average  consumer,  and  in  relation  to  the  group. 
It  remains  to  consider  it  from  the  point  of  view  of  potentiaUties 
and  the  Umitations  thereon.  How  much  more  business  is  it  pos- 
sible for  this  company  to  get,  and  what  are  the  limitations  on 
the  market?  What  are  the  factors  which  tend  to  restrict  the  scope 
of  sales  activity,  and  of  how  much  importance  are  they?  These 
questions  must  be  investigated  by  the  surveyor  before  his  task  of 
market  analysis  is  complete. 

The  Potential  Market.  What  are  the  opportunities  to  extend 
the  company's  sales?  Are  they  at  the  expense  of  competitors,  or 
do  they  lie  through  the  development  of  new  fields?  It  has  been 
pointed  out  previously  that,  as  a  general  rule,  it  is  a  risky  and 
expensive  undertaking  for  a  company  manufacturing  an  article 
in  which  there  is  great  competition  to  attempt  to  capture  trade 
from  companies  already  established.  There  would  be  the  inertia 
of  goodwill  to  be  overcome,  a  distributive  mechanism  to  set  in 
motion,  the  possibility  of  a  long  and  costly  price  war  in  addition 
to  an  educational  advertising  campaign.  For  a  company  without 
ample  financial  backing,  such  a  venture  would,  under  ordinary 
circumstances,  be  precarious.  For  any  company,  it  should  be  a 
matter  for  most  careful  consideration. 

It  is  part  of  the  surveyor's  task  to  study  this  question  from 
all  angles.  If  his  company  has  an  individual  product,  or  one  the 
field  for  which  is  not  already  preempted,  the  proposition  is  dif- 
ferent. In  the  case  of  a  new  product,  the  difficulty  of  overcoming 
competition  does  not  yet  exist.  If  it  is  an  improvement  over  an 
old  product,  there  may  also  be  good  opportunity. 

Chart  No.  41,  prepared  by  the  Chicago  Tribune,  is  intended 
to  show  why  the  Chicago  territory  offers  least  resistance  to  motor 

242 


THE  POTENTIALITIES  AND  LIMITATIONS 


243 


truck  propaganda,  based  on  the  analogy  of  automobile  ownership, 
and  that  more  automobiles  in  proportion  to  the  population  are 
owned  in  that  territory  than  anywhere  else  in  the  country. 


TOTAL  POPULATION,  U.  S.  (1917),  102,826.105 

TOTAL  AUTOMOBILES,  U.  S.  (Dec.  31,  1917),  5.148.063 
1  Auto  to  every  19.97  people. 


CHICAGO  TERRITORV— 
Total  population,    16,832,869- 
Total  automobiles,   1,205,708 
1  auto  to  every  13  people 


THE  WEST— 

Total  population,  29,287,571 
Total  automobiles,  1,786,570 
1  auto  to  every  15  people. 

'^^^        THE  EAST— 

^^^^^  Total  population,   34,325,415 

Total  automobiles,  1,604,969 
1  auto  to  every  21  people. 

KVVS.V.SI        THE  SOUTH- 

tSx^-yV-Qil  Total  population,   22,380,251 

Total  automobiles,  550,816 
1  auto  to  every  40  people. 


Fig.  41. — Map  Comparing  Number  of  Automobiles  in  Various  Sections. 

(Chicago  Tribune.) 


If  a  new  territory  is  to  be  entered,  obviously  the  one  to  be 
chosen  is  that  which  offers  the  minimum  sales  resistance.  It  is 
not  enough  for  the  surveyor  to  show  where  the  market  must  be 
extended.     He  must  prove  which  territory  or  section  is  best, 


244  MARKET  ANALYSIS 

what  its  yield  should  be,  how  long  it  should  take  to  cultivate  it, 
and  what  the  cost  would  amount  to. 

Limitations  on  the  Market.  Before  becoming  enthusiastic 
about  a  potential  market,  the  surveyor  should  consider  the 
obstacles  which  obstruct  it.  Eveiy  market  has  its  particular  limi- 
tations. It  is  rare  to  have  one  limiting  factor;  usually  there  are 
several.  Theoretically,  every  house  wired  with  electricity  is  a 
market  for  a  washing  machine.  Actually,  only  a  certain  per- 
centage of  this  number  of  electrically  wired  houses  is  a  market, 
since  the  limiting  factors  of  income,  custom,  dependence  on  a 
laundry,  etc.,  reduce  the  potential  market. 

In  considering  these  limitations  on  the  market,  the  investi- 
gator must  study  the  matter  from  the  point  of  view  of  the  par- 
ticular product  and  company,  rather  than  from  the  point  of  view 
of  the  industry.  Each  company  has  certain  advantages  or  dis- 
advantages over  other  members  of  the  industry.  One  has  prefer- 
ential location,  another  secret  or  patented  processes,  another 
an  excellent  distributing  organization,  etc. 

It  is  difficult  to  distinguish  between  a  limitation  on  the  product 
and  one  on  the  market.  The  two  are  interrelated;  they  react 
upon  each  other.  An  electric  fan  which  nms  on  direct  current 
is  restricted  to  houses  with  direct  current  service.  Both  the 
use  of  the  fan  and  its  market  are  limited.  Yet,  because  the 
market  Hmitation  is,  after  all,  the  most  important,  the  subject  of 
limitations  is  treated  in  this  section  on  markets. 

Following  are  some  of  the  important  limiting  factors  which 
are  Hkely  to  be  encountered  in  market  survey  work. 

Price.  In  nine  cases  out  of  ten,  price  is  the  greatest  of  limiting 
factors.  The  figure  at  which  the  company  is  prepared  to  sell 
the  product  will  often  determine  the  market.  For  this  reason, 
the  object  of  many  market  surveys  is  to  fix  a  price  at  which  the 
product  may  be  sold  in  quantity,  while  stiU  allowing  a  fair  mar- 
gin of  profit  for  the  manufacturer. 

In  the  case  of  nearly  every  product,  there  is  a  price  at  which 
the  majority  of  sales  are  made,  that  is,  the  average  price.  In 
products  sold  higher  than  this,  the  quality  appeal  predominates; 
in  products  sold  under  this  figure,  the  price  factor  is  predominant. 
Opinion  differs  as  to  the  importance  of  this  price  factor.  The 
Milwaukee  Journal  found  in  their  survey  of  the  tobacco  field  that 


THE  POTENTIALITIES  AND  LIMITATIONS  245 

the  most  popular  cigar  was  sold  two  for  25  cents,  the  most  popular 
cigarette  was  the  20-cent  size  and  the  most  popular  tobacco  sold 
for  17  cents.  In  other  words,  the  majority  of  people  paid  these 
prices  for  their  smoking  materials.  But  when  the  dealers  were 
asked  if  price  was  a  decisive  factor  in  determining  sales,  68  said 
"  no,"  47  said  "  yes,"  and  17  said  "  occasionally."  This  would 
lead  to  the  belief  that  dealers  themselves  had  no  very  accurate 
idea  of  how  great  a  drawing  card  price  was. 

In  the  final  analysis,  price  is  regulated  by  competition. 
Price  either  induces  or  prevents  sales.  It  is,  of  course,  a  trait  of 
human  nature  to  charge  all  that  can  be  got,  and  pay  as  little  as 
necessary.  Fortunately  there  are  controlling  factors  which, 
over  a  long  duration  of  time,  prevent  sustained  excessive 
charges.  Production  efficiency  is  the  great  argument  for  our 
large  corporations,  and  a  reasonable  price  for  the  competitive 
system. 

Prejudices  of  the  consumer  may  have  some  effect  on  the  price. 
It  was  found  in  one  instance  that  consumers  were  paying  10  cents 
a  pound  more  for  colored  than  for  uncolored  margarine.  But 
prejudice  does  not  always  account  for  discrepancy  in  price  or  yet 
does  relative  cost  of  manufacture  or  competition.  A  safety  razor 
retailing  for  $1  may  be  better  than  the  one  retailing  for  $5.  One 
explanation  of  the  large  sales  made  by  higher-priced  razor  manu- 
facturers is  that  people  have  so  much  trouble  shaving  that  many 
prefer  to  buy  the  most  expensive  razor,  supposing  it  wiU  prove 
most  satisfactory. 

The  sui^veyor  must  regard  the  problem  of  price  from  two 
angles:  first,  the  price  at  which  his  company  can  afford  to  sell 
the  product,  and  second,  the  price  which  the  public  will  pay  most 
readily.  With  these  two  points  in  mind,  he  can  always  render  a 
decision,  providing  that  excessive  competition  or  some  other 
serious  situation  does  not  compel  the  company  to  adopt  a  different 
price  policy. 

Fashion.  Fashion  both  makes  and  limits  market  opportuni- 
ties. One  year,  fashion  will  create  a  market  for  ostrich  feathers 
and,  the  next  season,  the  demand  will  be  gone.  There  are  fash- 
ions and  styles  in  almost  every  kind  of  product.  In  most  instances, 
taste  changes  slowly.  Styles  in  electric  fixtures,  in  furniture,  in 
machinery,    change    at   long  intervals.     Automobiles  change  in 


246  MARKET  ANALYSIS 

appearance  more  frequently.  Clothing  and  millinery  are  so 
uncertain  that  they  may  not  last  the  season. 

Therefore  the  surveyor  must  notice,  in  computing  his  market 
data,  to  how  great  an  extent  this  limiting  factor  of  fashion  will 
affect  the  market.  Will  it  have  practically  no  influence,  as  in  the 
market  for  typewriters,  or  will  it  be  decidedly  a  hmiting  factor, 
as  in  the  market  for  footwear? 

In  considering  fashion,  the  surveyor  should  ascertain  first, 
how  deeply  this  factor  affects  the  market,  and  second,  how  rapidly 
it  changes.  It  may  not  be  possible  to  establish  mathematically 
the  exact  coefficient  of  this  speed  element,  but  some  quantitative 

City  and  Number  of  Trucks 

Chicago  fSXS^ - _-        Black  portion  represents  cost  per  mile 

35  f _J        Gray  portion  represents  cost  per  hour 

Detroit  lESS^^K^rassasmsL 

1 

Indianapolis 

9 
Philadelphia 
14 

St.  Louis 
4 

Washington 
16 


Fig.  42. — Cost  of  Operation  of  Government  Owned  Post  Office  J^-Ton  Motor 
Trucks  at  Principal  Cities.     (Chicago  Tribune.) 

expression  of  this  factor  is  desirable,  particularly  in  connection 
with  study  of  the  turnover  of  stocks. 

Cost  of  Operation.  One  of  the  first  questions  the  prospective 
automobile  owner  asks  the  salesman  is:  "  How  much  does  it  cost 
to  run?"  That  is,  it  is  not  always  the  initial  price  that  determines 
the  sale,  but  the  economy  in  operation.  The  accompanying  chart. 
Fig.  42,  is  interesting  in  that  it  shows  the  wddely  differing  costs  of 
operation  of  government  post-office  trucks  in  the  principal  ..cities. 
For  instance,  the  three-quarter  ton  motor  truck  in  Chicago  costs 
less  than  haK  as  much  to  run  as  in  Detroit  or  Philadelphia. 

The  surveyor  should  not  fail  to  ascertain  the  cost  of  upkeep 
of  the  product,  what  the  percentage  of  repairs  is,  etc.  It  is  con- 
ceivable that  a  highly  efficient  machine  would  cost  more  to  the 


THE  POTENTIALITIES  AND  LIMITATIONS  247 

owner  in  repairs  than  the  saving  effected  over  a  less  efficient 
but  more  rehable  one. 

Such  studies  are  valuable,  not  only  on  account  of  the  actual 
information  they  yield,  but  also  because  they  supply  considerable 
sales  material.  Buyers  are  commonly  becoming  very  keen  in 
their  analyses  of  markets,  and  are  susceptible  to  persuasion  by 
figures  obtained  from  actual  tests.  It  is  important  to  remember 
that  such  tests  are  much  more  valuable,  from  a  sales  angle,  if  they 
are  comparative. 

Seasonal.  In  almost  every  business  there  is  a  dull  season. 
It  may  be  no  more  than  a  slight  falling  off  during  the  summer 
or  winter.  In  that  event,  the  effect  is  small  and  the  market 
fairly  stable. 

In  other  cases,  the  business  is  highly  seasonal.  For  instance,  the 
seed  business  comes  into  prominence  for  a  few  months  during  the 
spring  and  sinks  back  into  dullness  again.  This  is  an  unavoid- 
able seasonal  limitation.  Seeds  will  grow  outdoors  only  during 
the  summer.  The  florist  has  another  seasonal  problem  in  that 
his  markets  tend  to  be  much  larger  at  Christmas  and  Easter  than 
at  other  times.  Fourth  of  July  is  responsible  for  most  of  the 
fireworks  business,  and  the  Christmas  festivities  have  come  to 
be  regarded  as  accelerating  retail  purchasing  generally,  not  to 
mention  its  effect  on  the  toy  business  and  the  manufacture  of 
Christmas  tree  ornaments,  Christmas  cards,  Christmas  candy, 
etc. 

There  has  been  a  concerted  effort  recently  by  many  industries, 
supposed  hitherto  to  be  seasonal,  to  remove  their  products  from 
the  seasonal  to  the  all-year-round  class.  The  toy  manufacturers 
have  advertised  extensively  with  this  end  in  view,  and  growers 
of  walnuts  and  almonds  have  also  attempted  it  successfully. 

The  surveyor  must  determine  the  degree  of  seasonal  fluctua- 
tion, and  whether  this  is  inherent  and  unavoidable,  as  is  the  case 
with  men's  straw  hats,  or  possible  of  correction,  as  in  the  case  of 
lemons  and  raisins. 

The  tractor  business  is  seasonal.  Tractors  are  sold  in  the  early 
spring.  On  the  other  hand,  the  tractor,  like  the  automobile,  is 
manufactured  on  a  quantity  production  basis,  and  to  be  done 
economically,  production  must  be  maintained  at  a  constant 
level  day  in  and  day  out.     One  limiting  factor  on  the  tractor 


248  MARKET  ANALYSIS 

market  is  e\i(ientl3''  the  seasonal  character  of  the  demand.  To 
avoid  this  Kmitation,  the  more  progressive  tractor  companies  have 
extended  their  markets  south  of  the  equator  where  the  seasons  are 
exactly  the  reverse  of  ours.  Here  they  find  the  demand  which 
supplements  the  home  requirements. 

The  accompanying  chart,  No.  43,  shows  the  highly  seasonal 
character  of  the  tire  business,  with  high  spots  in  March  and  July 
and  depression  during  November  and  December.     Some  grocers 

JULY  10-5% 
MAR.I0-27o 

Junno-iZjt 

JAH9-8% 

\AUG.9-6% 


SEP7.7-B7o 


OCT.6-4-% 


^^4-a%k^_^.^^^ 


Fig.  43. — Average  Monthly  Tire  Sale,  Showing  Percentage  of  Sales  Each 
Month  from  Factory  to  Dealer  or  Jobber.  Based  on  Three-year  Average. 
Statistics  Class  Journal  Co.     {The  Quality  Group.) 

say  that  in  winter  months  oat  and  wheat  cereals  are  in  consider- 
ably greater  demand  than  in  the  warm  months.  Along  this  same 
line,  it  is  said  that  sales  of  oleomargarine  fall  off  about  25  per 
cent,  during  the  summer  months,  due  to  the  fact  that  less  food  of 
a  fatty  character  is  used  during  hot  weather.  The  Baltimore 
News  supplies  the  following  reasons  from  its  investigation,  showing 
the  wide  diversity  of  opinion  the  surveyor  may  encounter  along 
such  lines:  One  dealer  said  decrease  in  the  summer  was  due  to 
increased  production  of  creamery  butter  during  the  summer  and 


THE  POTENTIALITIES  AND  LIMITATIONS  249 

the  lower  price  compared  with  winter  of  real  butter;  another  said 
it  was  on  account  of  increased  consumption  of  fruit  and  vegetables, 
and  a  third  said  in  warm  weather  the  spread  went  further.  All 
are  plausible  and  perhaps  each  is  a  contributing  factor  to  the 
undoubted  decrease. 

The  surveyor  can  do  much  to  show  his  associates  the  great 
possibihties  of  stabilizing  seasonal  fluctuations. 

The  International  Harvester  Company,  according  to  Printers' 
Ink,  found  it  necessary  to  educate  its  salesmen  in  order  to  make 
them  regard  cream  separators  as  an  all-year  sales  proposition. 
Coco-Cola,  through  advertising,  was  able  to  make  some  soda 
fountains  in  the  South  remain  open  all  winter,  and  appreciably 
prolonged  the  season  elsewhere. 

Many  other  examples  could  be  introduced,  but  these  are 
sufficient  to  show  the  surveyor  the  importance  of  seasonal  demand 
and  the  necessity  for  examining  it  carefully.  It  may  be  possible 
that  the  seasonal  character  of  the  demand  is  not  ineradicable,  but 
due  to  custom  or  some  other  equally  removable  obstacle.  In 
this  connection,  it  may  be  possible  to  introduce  a  new  product, 
the  sale  of  which  follows  a  different  seasonal  law,  and  thereby 
stabilize  production. 

Climate  and  Weather.  The  surveyor  will  find  that  climate 
and  weather  influence  the  market  more  frequently  than  might 
be  imagined.  Some  of  the  commoner  effects  are  well  known, 
and  often  quoted.  Umbrellas,  for  example,  cannot  be  sold  in  New 
Mexico,  where  it  does  not  rain,  nor  woolen  overcoats  in  Florida, 
where  it  is  not  cold.  In  the  dry  farming  country,  a  particular 
type  of  agricultural  implement  is  required.  The  grade  of  lubri- 
cating oil  used  varies  with  the  climate  and  the  temperature. 
The  surveyor  might  delineate  the  market  for  furnaces  by  an 
isothermal  line.  So,  also,  might  he  plot  the  market  for  snow 
shovels. 

Some  curious  effects  of  the  climate  are  not  so  apparent.  For 
instance,  intense  heat  has  a  tendency  to  promote  growth  of  the 
beard,    making   shaving   a   necessary   daily   event. 

In  some  cases,  style  complicates  the  effect  of  the  weather. 
Men  wear  fur  for  warmth;  women  apparently  wear  fur  for  other 
reasons.  The  same  is  true  of  straw  hats.  Definite  limits  have 
been  set  for  men  outside  of  which  they  are  worn  only  at  the  risk 


250  MARKET  ANALYSIS 

of  ridicule,  while  women  wear  straw  hats  in  mid-winter,  if  fashion 
demands. 

The  weather  may  have  some  milooked-for  effects.  For 
instance,  if  the  season  has  been  particularly  favorable  to  insect 
life  or  fungus  diseases,  the  makers  of  insecticides  and  fungicides 
will  prosper.  An  open  winter  restricts  the  sale  of  coal,  food  and 
clothing.  Oq  the  other  hand,  it  stimulates  the  sale  of  gasoline 
and  tires. 

Climatic  and  meteorological  changes  usually  do  not  offer  the 
same  scope  for  constructive  research  as  seasonal  ups-and-downs, 
as  they  are  less  susceptible  to  prediction.  In  the  case  of  retail 
stores,  however,  these  changes  demand  careful  study  and  prompt 
action,  and  can  be  taken  advantage  of  by  the  shrewd  merchandiser. 

New  and  Second-hand.  For  most  products,  the  fact  that  they 
are  second-hand  depreciates  their  value.  For  a  few  products, 
that  same  fact  tends  to  enhance  their  value.  In  jewelry,  for 
example,  many  stones  acquire  a  history  from  their  owners.  Books, 
stamps,  and  curios  often  bring  higher  prices  for  the  veiy  fact  of 
their  being  second-hand. 

But  for  the  majority  of  conamodities,  the  second-hand  market, 
when  it  exists,  exercises  a  certain  limiting  influence  upon  the 
market  for  the  new  product.  A  certain  percentage  of  purchasers 
buy  the  second-hand  product  in  preference  to  the  new  one,  either 
because  they  have  not  the  price  for  the  new  product,  or  because 
they  are  satisfied  with  the  service  to  be  obtained  from  the  second- 
hand product.  This  is  particularly  true  in  the  automobile  field, 
where  many  concerns  have  made  serious  attempts  to  cope  with 
this  resale  problem.  Some  concerns  take  the  second-hand  cars, 
rebuild  them,  and  sell  them  under  guarantee. 

Dealers  in  second-hand  articles,  automobiles,  store  fixtures, 
furniture,  clothing,  etc.,  are  quite  likely  to  be  grouped  together. 
The  second-hand  business  is  necessarily  local,  since  the  purchas- 
ing is  local,  and  margin  of  profit  is  seldom  large  enough  to  allow 
of  any  expensive  overhead,  such  as  a  chain  of  second-hand  stores 
would  entail.  Second-hand  stores  are  usually  in  the  poorer 
quarters  where  the  market  is  most  hkely  to  be,  although  the 
automobile  second-hand  dealer  is  an  exception.  So  also  is  the 
second-hand  piano  dealer. 

One  of  the  important  things  under  this  head  is  to  consider 


THE  POTENTIALITIES  AND  LIMITATIONS  251 

the  competition  arising  from  the  company's  own  product,  as  sold 
by  second-hand  dealers.  Such  competition  cannot  be  coped 
with  in  quite  the  usual  fashion,  and  calls  for  special  study.  Fur- 
thermore, in  estimating  numerically  the  market  potentialities 
of  a  manufactured  article,  due  deduction  must  be  made  for  resale 
of  the  company's  product. 

Government  Restrictions.  Frequently  the  surveyor  will  find 
legal  or  government  restrictions  on  the  market.  Limitations  are 
placed  on  the  shipment  of  certain  slirubs,  plants,  etc.,  because 
of  insect  pests  which  might  thus  be  disseminated  through  a  wider 
territory. 

In  the  hteraiy  field,  there  are  copyright  laws,  and  there  are 
also  la'w's  which  forbid  the  pubhcation  of  certain  types  of  litera- 
ture. The  Tauchnitz  editions  are  famous  examples  of  pirate 
publishing  carried  on  on  a  large  scale,  because  of  the  lack  of  copy- 
right laws  with  Germany. 

In  the  case  of  the  egret  feather,  the  opium  and  the  liquor  trafiic, 
the  market  is  entirely  cut  off  by  government  action.  In  the 
majority  of  cases,  however,  the  government's  supervision  tends 
merely  to  regulate  and  restrict,  and  not  to  prohibit. 

The  surveyor  must  also  look  to  the  regulations  of  foreign 
governments  in  regard  to  markets  for  different  articles.  For 
instance,  playing  cards  are  contraband  for  importation  into 
France  and  tariff  laws  seriously  restrict  markets  for  commodi- 
ties in  many  foreign  countries. 

The  question  of  licenses  for  selling  frequently  arises.  In  most 
cases,  it  is  fairly  small  and  is  usually  imposed  by  the  state  or 
Federal  government,  though  in  some  cases,  the  city  exacts  license 
fees,  as  in  the  case  of  the  peddler.  The  Federal  tax  on  tobacco, 
theatre  tickets,  and  soft  drinks  failed  to  restrict  the  market  to 
any  appreciable  extent. 

Government  restrictions  and  regulations  are  usually  so  inflexi- 
ble in  nature  as  to  offer  little  inducement  to  the  exponent  of 
commercial  research.  He  may,  however,  find  it  advisable  to  study 
prospective  legislation,  and  its  bearing  on  the  market. 

Prosperity  and  Depression.  No  one  as  yet  has  put  into 
practice  a  means  by  which  the  periodic  swings  from  prosperity 
to  depression  can  be  balanced.  In  accordance  with  their  fluctua- 
tions, prices  go  up  and  down,  and  also,  to  some  extent,  markets. 


252  MARKET  ANALYSIS 

The  nature  of  the  product  in  normal  times  will  determine  to  some 
extent  the  length  of  the  swing.  The  purchase  of  salt  is  not 
affected  materially  by  hard  times,  nor  any  of  those  articles  the 
continual  consumption  of  which  is  necessary.  Indeed,  it  has 
been  said  that  the  sale  of  matches  increases  in  hard  times  because 
the  men  out  of  work  smoke  more.  Again,  a  certain  baking  powder 
company  found  that  its  markets  in  hard  times  were  best  where 
conditions  were  worst. 

The  market  for  luxuries  theoretically  is  one  of  those  immedi- 
ately affected  during  hard  times.  That  is,  when  the  purchasing 
power  of  the  community  is  restricted,  the  buying  of  pianos, 
phonographs,  and  automobiles  must  wait  for  better  times.  This 
influence  extends  from  the  purchaser  to  the  manufacturer  of  these 
luxuries.  He  curtails  his  production,  and  ceases  buying  raw 
materials.  Then  production  at  the  mines  and  other  sources  falls 
off. 

The  truly  successful  manufacturer  is  the  one  who  in  hard 
times  plans  for  good,  and  vice  versa.  In  making  a  survey  and 
presenting  conclusions  and  recommendations,  the  investigator 
must  remember  that  an  analysis  made  on  the  crest  of  a  prosperity 
wave,  or  at  the  bottom  of  a  period  of  depression,  is  not  normal. 
It  is  colored  by  the  universal  optimism  or  pessimism  rife  at  the 
moment.  Thus,  he  should  always  try  to  view  the  problem,  not 
from  the  standpoint  of  yesterday,  today,  or  tomorrow,  but  from 
that  of  the  average  period. 

These  limitations  are  some  of  those  which  may  beset  the  path 
of  the  surveyor.  They  are  by  no  means  all.  Every  business 
has  its  own  peculiar  limitations  which  only  become  apparent  on 
examination.  Of  whatever  nature  they  are,  they  must  be  given 
proper  weight. 

The  surveyor  has  now  studied  the  product,  the  company,  the 
customers,  and  the  market.  It  remains  for  him  to  put  into  actual 
practice  the  facts  he  has  gleaned  up  to  this  point;  he  must  make 
an  estimate  of  the  company's  potentialities. 

Computing  Potential  Markets.  The  science  of  market  analy- 
sis has  not  yet  developed  to  the  point  where  definite  formulae 
can  be  laid  down  for  the  solution  of  marketing  equations.  So 
far,  every  case  must  be  worked  out  individually  and  according  to 
the  surveyor's  owti  lights.     It  is  here  that  knowledge  of  hard- 


THE  POTENTIALITIES  AND  LIMITATIONS  253 

headed,  cold-blooded,  old-fashioned  business  must  make  up  for 
the  sketchy  and  experimental  nature  of  his  analytical  data.  The 
most  we  can  expect  is  that  an  examination  of  the  results  obtained 
in  other  researches,  and  of  the  methods  there  employed,  will 
supply  him  with  the  necessary  ideas  for  going  ahead. 

No  matter  how  many  special  factors  may  complicate  the 
specific  mathematical  problem  of  computation,  in  general  there 
are  certain  things  which  enter  in  every  equation.  First,  you 
must  find  out  how  many  people  want  the  product,  and  what 
proportion  of  them  can  afford  it  and  might  reasonably  be  expected 
to  become  purchasers.  Then  there  is  the  question  of  the  product 
and  how  often  it  must  be  renewed,  that  is,  how  long  on  the  average 
will  it  last?  It  is  the  same  old  story  of  the  market  and  the  product. 
Then  there  are  all  the  other  limiting  factors  affecting  the  equation. 
No  company  can  hope  to  get  all  the  potential  business  on  account 
of  competition.  Somebody  else  is  going  to  obtain  a  substantial 
share  of  the  business.  All  the  other  limitations  must  be  considered 
separately,  and  a  certain  value  attached  to  them.  That  value, 
in  turn,  must  be  deducted  from  the  potential  figures. 

Obtaining  and  utilizing  an  index  of  markets  is  a  short  cut.  It 
should  be  used  for  a  check,  rather  than  for  anything  else.  If  you 
send  out  a  surveyor,  a  scout,  into  a  territory  and  interview  all 
or  a  given  proportion  of  the  whole  as  to  how  many  want  telephones, 
it  is  the  direct  method.  Using  the  example  previously  cited, 
determining  how  many  people  want  telephones  by  the  amount  of 
paint  sold  in  that  territory  is  only  a  short-cut.  It  has  been  found 
by  experience  that  such  an  index  is  an  easy  method  of  estimating 
the  market.  It  is  an  indirect  method.  When  the  number  of 
houses  wired  is  used  as  an  index,  it  is  much  more  direct,  but 
even  in  this  case,  the  value  of  that  index  should  be  verified  by 
actual  test  and  experiment. 

Thus,  in  the  ordinary  method  of  computing  a  market,  we 
must  know  the  life  of  the  product  under  average  usage,  who 
uses  it,  how  many  use  it,  who  can  afford  to  buy  it,  plus  the 
specific  limitations  affecting  the  case  in  question.  Multiplying 
the  number  obtained  by  the  average  price  gives  the  value  of  the 
potential  market. 

It  may  be  of  help  to  cite  some  instances  of  how  others  have 
computed    markets.     The    Crowell    Publishing    Company    has 


254  MARKET  ANALYSIS 

furnished  some  interestlno;  information  on  the  potential  market 
for  electric  washing  machines.  They  say:  "  In  January,  1918, 
the  Western  Electric  Company  made  a  detailed  survey,  and 
estimated  that  5,000,000  houses  were  wired  with  electricity  at 
that  time.  In  July,  1920,  reports  from  5,000  central  stations 
established  the  fact  that  in  the  United  States  there  were  6,291,160 
dwellings  electrically  wired. 

"  In  these  homes  live  33,008,500  persons,  or  30.7  per  cent,  of  the 
entire  population  of  the  country.  In  the  territory  covered  by 
central  stations,  there  are  62,023,400  persons  residing,  or  57.3  per 
cent,  of  the  total  population  of  the  United  States.  Of  this  group, 
55.8  per  cent,  hve  in  electrically  hghted  houses.  This  suggests 
that  the  territory  covered  by  central  stations  is  an  unusually 
rich  field  for  the  sale  of  electrical  applicances.  But,  at  the  same 
time,  the  entire  countiy  holds  the  greatest  possibility. 

"It  is  estimated  by  the  Westinghouse  Electric  and  Manu- 
facturing Company  that,  in  1920,  800,000  washing  machines, 
valued  at  $100,000,000,  were  sold.  In  1916,  only  150,000  of 
these  machines  were  sold.  Even  during  1919,  only  475,000 
machines  were  disposed  of. 

"  In  regard  to  the  future,  capable  authorities  estimate  that 
98  per  cent,  of  the  houses  now  being  built  in  cities  and  towns  are 
being  wired  for  electricity.  More  attention  is  being  paid  by 
architects  and  contractors  to  the  proper  location  and  number  of 
outlets  for  all  classes  of  electrical  appliances.  In  some  cases  a 
separate  wiring  system  is  built  into  the  house  that  permits  appli- 
ances to  be  connected  to  a  separate  meter." 

The  above  is  an  excellent  analysis  of  general  conditions  from 
which  any  particular  company  should  be  able  readily  to  compute 
its  market.  It  is  worthy  of  note  that  in  this  computation,  an  index 
was  used,  and  that  as  a  check,  the  rate  of  growth  in  sales  of  wash- 
ing machines  over  the  past  few  years  was  given.  There  was  no 
attempt  to  figure  out  just  how  much  of  the  potential  market  could 
be  turned  into  actual  customers,  since  the  obvious  gap  between 
actual  production  and  possible  sales  was  so  large. 

In  estimating  the  cotton  toweling  market,  the  direct  method 
was  used.  By  a  careful  field  survey,  it  was  found  that  the  average 
initial  equipment  of  the  one  million  families  marrying  each  year 
was  a  half-dozen,  making  3,000,000  dozen  towels  sold  to  this 
source.     It  was  found  that  another  half-dozen  was  used  for  upkeep 


THE  POTENTIALITIES  AND  LIMITATIONS  255 

annually  by  each  of  the  other  22,400,000  famiHes  in  the  United 
States,  making  a  grand  total  of  12,200,000  dozen  as  the  annual 
potential  market  for  towehng  of  all  kinds.  From  this  figure,  of 
course,  had  to  be  deducted  linen  and  other  toweling  to  get  the 
figure  for  cotton  toweling. 

These  examples  are  enough  to  show  the  surveyor  the  general 
way  the  problem  of  computation  is  attacked.  It  only  remains 
to  stress  the  great  necessity  for  accuracy.  The  statements  made 
must  be  indisputable.  There  must  be  authority  for  every  figure. 
It  is  like  a  problem  in  algebra  where  all  the  steps  are  given  by  which 
the  answer  is  reached. 

General  Conclusions.  Apropos  of  market  potentialities,  it 
is  common  experience  that  they  look  brighter  than  they  actually 
may  prove  to  be.  Before  recommending  an  entry  into  new  fields, 
the  surveyor  should  make  certain  what  obstacles  and  flaws  may 
be  encountered.  Entering  a  new  market  is  like  preparing  for  a 
journey.  You  must  decide  where  you  are  going,  when  you  are 
going  to  start,  how  much  it  will  cost  you,  what  troubles  and 
difficulties  you  are  likely  to  encounter,  and,  above  all,  whether 
the  trip  is  going  to  pay  for  itself. 

Too  much  importance  can  be  attached  to  quantitative  apprais- 
als of  markets.  They  are  well  enough  for  rough  estimates  and 
bases  for  sales  quotas,  but  it  is  useless  to  reckon  them  too  far 
ahead,  because  by  the  time  the  company  has  reached  a  point 
where  it  can  avail  itself  of  the  market  revealed,  conditions  may 
have  changed  radically.  Of  course,  there  are  many  business 
men  who  wish  everything  in  figures,  and  you  must  cater  more  or 
less  to  this  demand,  but  you  must  remember  that  you  cannot  keep 
a  ledger  or  a  journal  about  things  which  have  not  yet  come  to  pass. 
Computations  as  to  the  future  are  at  best  only  approximations. 

There  are  research  men  who  are  willing  to  make  over-positive 
statements  about  potentialities,  but  men  of  this  kind  could  leam 
much  from  the  Delphic  oracle,  which  always  included  a  conditional 
clause  or  other  loophole  in  making  any  forecast. 

The  study  of  limitations  necessarily  entails  a  consideration 
of  how  these  limitations  arc  to  be  obviated.  At  least,  this  is  the 
mental  process  of  the  salesman  and  incidentally  a  great  deal  of 
valuable  sales  propaganda  may  be  obtained  through  a  study  of 
limitations,  restrictions,  and  other  such  negative  factors.  Doing 
away  with  a  limitation  invaiiably  reveals  a  potentiality. 


CHAPTER  XVI 
DISTRIBUTION 

Outline 

What  is  the  trend  of  distribution  in  the  industry? 

(a)  Is   it   towards   simpUfication   of   functions   and   the   elimination   of 

middlemen? 
(6)  Is  it  towards  multipUcation  of  fimctions? 

What  effect  do  the  following  factors  have  upon  the  distributive  organization? 

(a)  The  product. 

(1)  Does  the  price  of  the  product  determine  the  method  of  distribution? 

(2)  Does  the  nature  of  the  product,  its  perishabiUty,  or  size  determine 

the  method  of  distribution? 

(b)  Service. 

(1)  Is  the  manufacturer  or  jobber  in  the  better  position  to  render 
the  service  required? 

(c)  Financing. 

(1)  Can  the  company  afford  direct  distribution,  and  the  doing  away 
with  middlemen? 

(d)  Volume  of  business. 

(1)  Can  the  company  support  the  burden  of  national  distribution? 

(e)  The  market. 

(1)  How  does  size  of  customers'  business  influence  the  distribution? 

(2)  How  does  the  location  of  the  market  affect  the  question? 

(a)  Does  the  fact  that  it  is  urban  or  rural  affect  the  problem? 
(/)    Credits. 

(1)  Are  customers  good  risks? 

(2)  Must  goods  be  sold  on  terms?    If  so,  can  the  company  afford  to 

finance  time  transactions? 

What  channels  of  distribution  are  best  fitted  to  the  company's  problem? 
(a)  Are  direct  methods  possible  or  best? 

(1)  Who  are  the  customers? 

(a)  Are  they  large  or  small? 

(b)  Are  they  scattered  or  bunched? 

(2)  Must  the  product  be  sold  direct  because  of  its  nature  or  qualities? 
(6)  Are  indirect  methods  necessary  or  advisable? 

(1)  What  are  the  present  links  of  distribution? 

(o)  What  economic  function  does  each  perform? 
256 


DISTRIBUTION  257 

(2)  What  are  the  possible  Unks  of  distribution?    How  would  each  fit 
into  the  company's  problem? 
(a)  The  jobber. 
(6)  The  retailer. 

(c)  The  commission  man. 

(d)  The  broker. 

(e)  The  manufacturer's  agent. 
if)   The  chain  store. 

{g)  The  mail  order  house. 
(Ji)  Other  methods. 

If  the  company  does  business  through  jobbers,  what  kind  are  they? 

(a)  Are  they  local,  sectional,  or  national? 

(6)  How  are  they  located? 

(c)  Does  the  company  sell  through  exclusive  agencies  or  not? 

{d)  What  are  the  relations  of  the  jobbers  with  the  company? 

(e)  How  large  stocks  do  they  carry? 

if)  Do  they  carry  and  push  other  lines? 

If  the  company  uses  dealers,  what  part  do  they  play? 

(a)  How  thoroughly  is  the  product  distributed  among  retailers? 
What  is  the  percentage  of  distribution  among  them? 

(1)  What  kind  of  dealers  carry  the  product? 

(2)  How  does  the  product  rank  with  competitors 
(a)  In  volume  of  sales? 

(6)  In  rate  of  distribution  among  retailers? 

(3)  How  are  dealers  located  geographically? 

(6)  Has  the  company  any  direct  personal  relations  with  dealers? 


CHAPTER  XVI 
DISTRIBUTION 

How  shall  this  product  be  brought  to  this  market?  Appar- 
ently there  are  almost  as  many  existing  methods  and  variations 
as  there  are  businesses.  Each  company  seems  to  have  its  own 
method  of  merchandising,  differing  in  some  details  from  that  of 
its  neighbor.  Actually,  however,  the  merchandising  method 
must  be  suited  to  the  product.  Any  material  change  in  the 
product  probably  should  mean  a  modification  of  merchandising 
methods.  The  mere  change  in  the  color  of  the  product  may  make 
considerable  difference  in  sales  and  sales  methods.  The  color  of 
the  upholstery  in  a  limousine,  although  of  no  importance  in  the 
eyes  of  the  automotive  engineer,  has  more  than  once  been  the 
determining  factor  in  making  a  sale. 

Merchandising  is  the  machineiy  of  publicity,  sales,  and  dis- 
tribution by  which  the  product  is  brought  to  the  market.  It  is 
the  investigator's  task  to  study  possible  methods  of  merchandis- 
ing, and  to  compare  the  policy  pursued  by  the  company  with 
methods  of  competitors.  He  should  contrast  these  methods  of 
distribution  much  as  he  would  their  respective  products. 

He  ought,  indeed,  to  look  upon  these  channels  of  distribution  as 
concrete,  tangible,  and  real  things.  He  ought  to  study  them  as  he 
would  study  a  piece  of  machinery.  Is  that  machinery  adequate, 
or  is  it  obsolete?  Is  it  large  enough  to  take  care  of  the  problem, 
or  would  it  be  advisable  to  make  it  bigger?  Contrariwise,  is  it 
already  so  large  that  possibly  it  might  handle  a  bigger  production 
than  the  factory  is  capable  of?  It  is  frequently  possible  to  increase 
sales  without  enlarging  the  merchandising  machinery. 

Individual  problems  of  this  nature  wiU  come  before  the  investi- 
gator. There  is  the  case  of  a  company  manufacturing  ice  skates 
whose  merchandising  machinery  is  idle  during  a  certain  part  of 
the  year.  This  company  has  been  faced  with  the  problem  of 
finding  another  product  of  similar  nature  to  manufacture,  the 

258 


DISTRIBUTION  259 

sale  of  which  could  be  carried  on  during  the  slack  season  and  in 
that  way  keep  the  machinery  turning  over.  Merchandising 
problems  will  often  be  found  to  be  more  individual  than  many 
other  questions  confronting  the  investigator.  It  will  not  be  so 
much  a  matter  of  research,  but  the  application  to  the  specific 
problem  of  the  research  already  done. 

The  Distributive  Problem.  Distribution  is  the  machinery  by 
which  the  seller  conveys  the  merchandise  to  the  purchaser.  It 
may  be  simply  handing  an  article  over  the  counter,  as  in  a  bake 
shop,  or  it  may  be  a  complicated  network  of  links  in  a  distributing 
chain  stretching  around  the  world,  as  in  the  case  of  Kodaks  or 
Waltham  watches.  By  reason  of  the  rapid  increase  in  variety 
and  volume  of  production  since  the  beginning  of  the  industrial 
era,  the  manufacturer  found  himself  unable  to  keep  in  his  own 
hands  many  of  the  distributive  functions  of  storage,  credits,  and 
the  divers  problems  of  supply.  These  functions  were  assumed  by 
intermediate  agencies,  wholesalers,  jobbers,  commission  houses, 
brokers,  etc.  These  middlemen  relieve  the  manufacturer  of 
attending  to  the  time  and  place  utilities,  as  they  are  ordinarily 
called,  and  in  return  for  these  services  take  a  certain  percentage 
of  profit. 

It  has  been  estimated  that  there  is  ordinarily  a  25  per  cent,  to 
60  per  cent,  difference  in  price  between  the  manufacturer  and  the 
consumer.  There  has  been  much  agitation  against  this  seem- 
ingly excessive  margin,  and  many  people  have  advocated  doing 
away  with  middlemen.  But,  with  a  few  exceptions,  such  as  mail- 
order houses,  it  is  generally  agreed  that  the  retailer  is  a  necessary- 
link  in  the  chain  of  distribution,  and  that  his  functions  cannot  be 
assumed  by  the  manufacturer  with  any  material  saving.  The 
point  which  should  be  kept  in  mind  throughout  the  study  of  dis- 
tribution is  that  there  are  certain  functions  which  must  be  per- 
formed and  that,  if  the  company  cannot  conveniently  assume  these 
functions,  then  the  necessity  for  the  middleman  becomes,  through 
a  process  of  redudio  ad  ahsurdum,  self-evident. 

The  brunt  of  the  attack  on  the  middleman  has  been  borne 
by  the  jobber.  Department  stores,  chain  stores,  cooperative 
buying  associations,  and  mail-order  houses  are  seeking  continually 
to  buy  as  directly  as  possible.  The  United  Drug  Company  is  an 
often  cited  example  of  a  successful  attempt  to  simplify  distri- 


260  MARKET  ANALYSIS 

bution.  It  consists,  briefly,  of  a  group  of  retailers  who  own  the 
stock  of  a  company  manufacturing  articles  for  their  consumption. 
The  great  reason  for  its  success  is  that  it  actually  does  simplify 
distributive  functions.  The  drug  trade,  however,  is  ordinarily 
cited  as  an  example  of  one  in  which  the  middleman  has  a  strong- 
hold, as  there  are  3,500  different  articles  on  the  shelves  of  even 
a  small  drug  store,  many  of  which  are  impossible  to  market 
direct,  so  rare  is  the  call  for  them,  and  so  small  the  druggist's 
average  sale. 

The  investigator  should  remember  that  no  distributive  method 
can  be  permanent  as  long  as  changes  are  constantly  being  made 
in  the  product,  in  the  method  of  making  the  product,  and  in  the 
market  itself.  He  should  study  each  step  in  the  present  dis- 
tributive processes  of  the  company,  asking  himseK  each  time: 
"  Does  this  fulfil  a  sufficient  economic  need  to  justify  its  existence 
or  maintenance?" 

The  chief  factors  which  tend  toward  simplification  of  distri- 
bution are,  first,  the  assumption  of  distributive  functions  by 
dealers  and  manufacturers;  second,  standardization  of  goods  by 
brand  and  trade  name;  and  third,  development  of  production  on 
such  a  scale  that  distribution  can  be  economically  handled  by  the 
manufacturer. 

Determining  Factors  in  Distribution.  The  principal  factors 
which  determine  the  methods  af  distribution  are:  (1)  The 
product,  (2)  service,  (3)  financing,  (4)  volume  of  business  done, 
(5)  the  market,  and  (6)  credits. 

(1)  The  Product.  As  in  every  other  phase  of  the  marketing 
problem,  the  nature  of  the  product  plays  a  leading  part.  For 
what  form  of  distribution  is  this  product  fitted?  It  is  evident  that 
perishable  goods  must  be  marketed  and  distributed  by  different 
methods  than  those  employed  with  products  with  indefinite  keep- 
ing qualities.  Paul  H.  Nystrom,  in  a  bulletin  of  the  Research 
Department  of  the  International  Magazine  Company,  gives  the 
example  of  yeast,  which  is  sold  direct  by  the  manufacturer  through 
a  highly  speciahzed  sales  organization  with  refrigerating  and 
dehvery  equipments,  and  "Yeast  Foam,"  an  article  which  keeps 
indefinitely  and  is  sold  to  grocery  jobbers  everywhere.  It  is 
obvious  that  each  of  these  products  demands  a  different  method 
of  distribution. 


DISTRIBUTION  261 

The  price  of  the  product  always  is  an  important  consideration. 
Low-cost  articles,  paradoxical  as  it  may  seem,  usually  cannot  be 
sold  direct.  The  margin  of  profit  does  not  allow  such  an  expen- 
sive method.  But  high-priced  articles,  with  large  margin  of 
profit,  allow  the  formation  of  a  specially  equipped  sales  force  to 
market  direct.  A  cash  register,  an  adding  machine,  a  sewing 
machine,  or  a  tractor  may  be  sold  direct.  Clothespins,  soap, 
buttons,  and  other  such  utiUty  articles  must  be  marketed  through 
jobbers. 

Generally  speaking,  the  more  bulky  the  article,  the  more 
tendency  exists  to  market  it  direct.  The  owner  of  a  gravel  pit 
sells  direct.  In  fact,  many  building  materials  are  ordinarily 
marketed  in  this  way.  The  same  applies  in  some  measure  to 
most  kinds  of  machinery. 

Thus  it  will  be  seen  that  the  product  itself  is  the  primary- 
factor  in  the  problem  of  distribution.  Here,  as  ever,  the  surveyor 
will  find  that  his  thorough  understanding  of  the  product  will 
enable  him  to  make  up  his  mind  as  to  the  most  logical  of  the 
various  alternatives  before  him. 

(2)  Service.  The  service  to  the  consumer  depends  partly  on 
the  product  and  partly  on  the  policy  of  the  company.  Some 
products  necessitate  service,  especially  those  of  a  technical  nature, 
such  as  linotypes,  lithographing  machines,  etc. 

If  the  manufacturer  makes  goods  in  quantity,  he  is  not 
ordinarily  in  a  position  to  render  individual  service  to  consimiers. 
This  fact,  if  the  product  is  one  which  needs  service  and  attention, 
spare  parts,  etc.,  will  unquestionably  have  considerable  bearing 
on  the  form  of  distribution  adopted. 

The  retailer  has  come  to  consider  himself  entitled  to  service 
from  the  manufacturer  in  helping  him  move  his  goods.  In  some 
cases  the  manufacturer,  owing  to  the  multiplicity  of  dealers,  is 
not  able  to  perform  this  function,  in  which  case  the  jobber 
logically  assumes  it. 

Every  company  in  the  long  run  has  to  give  some  service,  but 
the  amount  which  it  is  profitable  for  it  to  render  differs.  The 
maker  of  hooks  and  eyes  cannot  afford  to  give  much  service, 
while  the  seller  of  a  piano  can  usually  afford  to  keep  it  in  tune  for 
a  year. 

(3)  Financing.     Distribution,  like  any  other  business  opera- 


262  MARKET  ANALYSIS 

tion,  must  be  financed.  In  fact,  it  is  very  expensive  in  many 
cases.  Unless  the  company  has  a  great  deal  of  money  at  its  dis- 
posal, it  frequently  cannot  expect  to  take  care  of  distribution  and 
production  as  well.  Many  companies  are  oftentimes  not  in  a 
position  to  enlarge  their  distributive  functions  as  widely  as  might 
seem  warranted  by  market  possibilities.  Others,  for  purely 
financial  reasons,  find  it  more  expedient  to  retain  antiquated 
methods  of  distribution. 

(4)  Volume  of  Business.  The  larger  the  volume  of  business 
the  more  able  the  company  will  be  to  distribute  its  products 
widely.  The  surveyor  should  note  in  every  case  the  extent  of 
the  distributive  organization  at  present,  and  the  future  possi- 
bilities. National  distribution  is  the  goal  at  which  many  com- 
panies aim.  International  distribution  is  the  ultimate  goal.  A 
company,  in  order  to  attain  either  of  these  goals,  must  have  large 
production  facihties,  since  otherwise  distribution  on  such  a  scale 
would  be  useless.  Numerous  instances  will  come  to  mind  of 
companies  which  have  attempted  to  build  up  a  nation-wide  trade 
before  they  were  able  to  take  care  of  it.  The  question  here  for 
the  surveyor  is:  Where  is  the  point  at  which  the  more  extensive 
form  of  distribution  becomes  expedient? 

(5)  The  Market.  Large  consmners  ordinarily  prefer  to  buy 
direct.  Certain  automobile  manufacturers  refuse  to  purchase 
their  component  parts  through  distributing  concerns.  Some 
companies  have  adopted  a  plan  by  which  they  sell  direct  to  large 
consumers  and  large  markets,  while  pursuing  a  policy  of  jobbing 
W'here  demand  is  not  so  brisk  or  so  concentrated.  This  plan  does 
not  always  work  satisfactorily,  since  both  jobber  and  dealer  are 
apt  to  consider  themselves  ill-treated.  The  markets  for  some 
products  are  so  diffuse  that  it  saves  the  compam^  much  money  to 
have  the  jobber  and  wholesaler  take  on  the  function  of  probing 
out  this  scattered  market  and  catering  to  it.  Thus,  rather  than 
attempting  to  handle  such  sales  direct,  companies  which  control 
their  own  distribution  east  of  the  Mississippi  often  sell  through 
jobbers  in  the  Western  territory.  Those  companies,  on  the  other 
hand,  which  do  distribute  to  Western  territories  from  their  own 
plant  frequently  have  to  maintain  warehouses  in  that  section. 
They  could  not  compete  if  they  did  not  provide  some  such  reser- 
voir of  goods. 


DISTRIBUTION  263 

The  investigator  should  study  the  geography  of  the  company's 
distribution.  He  should  find  out  which  districts  are  largest  users 
of  the  product,  which  states  lead  in  consumption,  whether  the 
distribution  is  mainly  urban,  or  whether  a  large  percentage  of  it 
is  rural.  He  should  also  notice  the  effect  on  distribution  of  dis- 
tricts where  buying  is  light  and  districts  where  it  is  heavy,  and  the 
relative  cost  to  the  eompany  in  each  instance.  In  this  way,  it  is 
possible  to  determine  the  cost  of  distribution  and  make  some  sort 
of  estimate  as  to  the  most  economical  methods  for  localities  of 
varying  importance. 

(6)  Credits.  Securing  payment  for  the  goods  sold  is  an 
important  part  of  merchandising.  When  the  middleman  assumes 
the  risk  of  collections,  he  is  performing  a  very  important  service, 
and  one  for  which  many  manufacturers  feel  they  can  afford  to 
pay  generously.  Those  companies  whose  customers  are  inher- 
ently poor  risks  usually  find  a  jobber  or  wholesaler  who  will  per- 
form this  function.  For  instance,  as  a  class,  shoe  repairers  are 
poor  risks,  and,  although  it  would  be  easier  to  sell  them  machinery 
and  goods  direct,  it  has  been  found  more  expedient  to  act  through 
a  jobber.  The  latter  takes  on  himself  the  task  of  looking  up  the 
credit  of  the  individual  concerns  and  of  securing  the  payments. 

There  are  many  factors  to  consider  in  the  payment.  For 
example,  it  may  be  in  advance  without  seeing  the  product,  as  in 
the  case  of  tickets  for  a  baseball  game,  or  of  articles  sold  through 
mail  order  houses.  It  may  be  on  dehvery,  or  it  may  be  after  use 
and  trial.  Every  regular  market  investigation  calls  for  a  con- 
sideration of  the  credit  system  used.  Possibly  a  much  larger 
volume  of  business  could  be  done  if  merchandise  could  be  sold  on 
terms.  It  is  said  that  pianos  would  not  command  a  fraction  of 
their  present  sales  volume  if  they  were  not  generally  sold  on  this 
instalment  plan.  Here,  as  always,  the  surveyor  must  consider 
possible  results  as  weighted  against  their  cost.  Does  it  pay  to 
merchandise  on  the  instalment  plan,  or  is  the  cost  of  carrying  the 
accounts  and  loss  through  bad  accounts  so  great  as  to  offset  the 
increase  in  volume  of  sales?  It  is  not  merely  a  question  of 
whether  a  man  will  Imy,  but  whether  he  can  pay. 

The  Channels  of  Distribution.  There  are  some  companies 
that  sell  direct,  and  others  that  sell  through  jobbers  and  dealers, 
and  there  are  still  others  which  attempt  to  do  both.     Paul  H. 


264  MARKET  ANALYSIS 

Nystrom,  in  the  "  Economics  of  Retailing,"  says  that  out  of 
every  one  hundred  concerns  doing  national  advertising,  17  sell 
to  jobbers,  18  sell  to  retailers,  11  through  agencies,  8  to  consumers 
direct,  29  sell  to  both  jobbers  and  retailers,  13  sell  to  retailers  and 
through  agencies,  4  sell  to  jobbers,  retailers  and  through  agencies, 
and  1  sells  to  jobbers,  retailers  and  consmners.  It  is  evident 
that  there  is  no  uniform  practice,  even  among  those  companies 
with  supposedly  national  distribution.  It  is,  as  said  before,  an 
individual  company  problem.  No  standards  have  yet  been  adopted. 
It  is  a  case  of  every  company  for  itself. 

Whenever  possible,  however,  a  company  should  try  to  set  up 
its  own  standards,  and  adhere  to  them.  But,  before  adopting 
any  one,  it  is  well  to  consider  all  the  various  alternatives,  and  then 
to  select  by  a  process  of  elimination.  This  is  the  scientific  way 
of  approaching  many  such  problems.  To  cite  a  specific  illustra- 
tion, we  may  refer  to  a  recent  survey  of  the  market  for  tractors. 
According  to  this  inquiry,  there  are  three  alternative  methods 
of  distribution  to  choose  from : 

(1)  Tractors  may  be  merchandised  through  the  farm  imple- 
ment dealer.  He  was  first  in  the  field,  has  an  intimate  connec- 
tion with  farmers,  and  a  thorough  knowledge  of  their  problems. 
The  greatest  volume  has  been  sold  through  this  channel,  and  it  is 
the  one  often  preferred. 

(2)  There  is  the  automobile  dealer  who  has  sold  hundreds  of 
automobiles  to  farmers  and  supposedly  can  sell  tractors  to  them 
as  well.  Automobile  sales  have  usually  been  for  cash  and  it 
sometimes  is  argued  that  this  ability  to  sell  for  cash,  transferred 
to  tractors,  is  a  greater  asset  than  the  intimate  knowledge  of 
farming  conditions. 

(3)  It  is  argued  in  support  of  the  third  method,  that  of  an 
indi\adual  tractor  dealer,  that  the  tractor  business  is  too  impor- 
tant to  be  an  adjunct  of  either  the  automobile  or  implement  busi- 
ness. It  demands  special  study,  and  should  be  built  from  the 
ground  up. 

The  above  problem  is  a  fair  example  of  one  which  might  con- 
front the  surveyor. 

An  actual  solution  of  a  specific  distributing  problem  is  that 
found  by  western  fruit  and  nut  growers.  It  consists  of  selling 
through  associations.     The  Raisin  Growers'  Association  has  gone 


DISTRIBUTION 


265 


so  far  as  to  announce  its  intention  of  marketing  its  product  direct 
to  the  dealers,  cutting  out  all  jobbing  operations.  This  is  a 
radical  step.     It  may  be  compared  to  that  taken  by  the  OHver 


lO&O 

Parts  SAcces 

Manufacturers 


550 

Auto  2c  Truck 
Manufacturers 


2.550  , 

Auto  Supply 
"Houses 


2800 

Distributors 


25  500 

Garages 


25  000 

Aulo  Dealers 


Fig.  44.— Analysis  of  Automobile  Industry,  Sliowing  Channels  of  Distribution. 
{The  Quality  Grmip.) 


Typewriter  Company,  when  it  announced  its  intention  of  halving 
its  price  and  selling  direct  to  consumers. 

Some  manufacturers  have  broken  loose  from  tradition  and 
created  new  distributing  channels  for  their  products.  The 
original  Pep-0-Mint  Life  Saver  was  said  to  be  a  failure,  due  to 


266  MARKET  ANALYSIS 

a  faulty  container.  The  enterj^rising  owner,  having;  ascertained 
the  difhculty  and  corrected  it,  found  that  candy  jobbers  would 
not  stock  it.  He  thereupon  induced  cigar  stands,  shoe  shining 
parlors,  restaurants,  etc.,  to  display  it,  on  the  theory  that  it  was 
a  product  a  man  would  not  buy  unless  it  came  into  his  field  of 
vision.  This  partially  explained  the  failure  of  the  candy  stores 
with  Life  Savers,  because  a  man  did  not  want  them  badly  enough 
to  go  into  a  store  to  get  them.  But  when  he  saw  them  at  the 
restaurant,  the  hotel,  etc.,  it  was  very  natural  for  him  to  buy. 
His  purchase  was  casual  and  incidental. 

A  manufacturer  of  hair  nets  found  the  department  stores 
unwilling  to  accept  his  nationally  branded  and  advertised  Hne. 
He  thereupon  made  arrangements  with  a  large  drug  chain  to  sell 
these  hair  nets,  and  the  venture  was  veiy  successful. 

Chart  No.  44  shows  the  ordinary  channels  of  distribution  in 
the  automobile  industry^,  with  parts  and  accessory  manufacturers 
selling  both  to  automobile  and  truck  manufacturers  and  to  dealers 
and  garages. 

The  surveyor  will  find  that  the  sketching  of  such  a  chart,  as 
applied  to  his  industiy,  will  amply  repay  the  few  minutes'  trouble 
involved,  since  it  will  focus  the  entire  distribution  as  it  is  or  should 
be.     Any  exceptions  of  moment  may  well  be  entered  on  the  chart. 

Direct  Distribution.  Any  sale  made  by  the  manufacturer  to 
the  consumer  without  passing  the  goods  through  the  hands  of  a 
middleman  is  said  to  be  merchandised  direct. 

The  size  of  the  company's  customers  is  one  index  of  the 
feasibility  of  direct  distribution.  If  the  larger  part  of  the  volume 
is  marketed  to  large  consumers,  then  it  is  likely  that  distribution 
may  be  simplified  by  eliminating  the  jobber.  If  the  consmners 
are  small  and  widely  scattered,  there  is  not  so  much  opportunity 
for  simplification.  Large  consumers  prefer  to  buy  direct  of  the 
company  because  it  enables  them  to  save  money.  SmaU  buyers 
often  prefer  purchasing  from  the  distributor. 

Of  course,  if  the  users  of  the  product  are  very  large  consumers, 
direct  distribution  should  in  many  cases  prove  of  mutual  advan- 
tage. Manufacturers  of  soap  powders,  who  normally  sell  through 
jobbers,  usually  make  an  exception  of  the  rule,  and  sell  direct 
to  mills,  prisons,  and  other  large  consumers. 

In  some  businesses,  selling  direct  is  imavoidable.     The  baker 


DISTRIBUTION  267 

sells  direct  because  he  must  be  in  close  proximity  to  his  market, 
and  any  delay  in  getting  the  product  to  it  by  complicated  methods 
of  distribution  would  involve  deterioration  in  the  product.  Other 
businesses  sell  direct  because  they  beheve  it  is  the  best  way,  and 
they  are  willing  to  assume  the  risk. 

There  is  no  inherent  virtue  in  any  one  method  of  distribution 
which  makes  it  especially  desirable.  All  depends  on  the  com- 
pany and  the  product.     Are  they  fitted  to  direct  distribution? 

If  sales  are  made  direct  from  the  seller  to  the  purchaser, 
does  this  method  correspond  with  general  practice  in  the  indus- 
try, or  is  it  an  exception?  If  an  exception,  what  are  the  results  as 
compared  with  ordinary  methods?  What  is  the  general  trend  of 
distribution  in  the  industry?  Is  it  towards  simplification  or 
diversity,  or  does  it  remain  stationaiy?  These  are  some  of  the 
questions  which  the  surveyor  may  use  as  a  test. 

Indirect  Distribution.  The  ordinary  chain  of  distribution  is 
producer,  wholesaler,  retailer,  and  consumer.  In  some  special 
businesses,  there  may  be  a  selling  agent  between  the  producer 
and  the  wholesaler.  He  may  be  an  importer,  a  broker,  a  commis- 
sion agent,  or  other  middleman.  Each  one  of  these  exists  because 
he  fills  a  definite  economic  need  in  the  industry.  If  this  need  is 
done  away  with,  he  disappears.  Thus,  distributive  systems  are 
constantly  being  changed.  It  is  simply  a  case  of  commercial 
evolution — the  survival  of  the  fittest. 

Before  making  any  decision  as  to  the  method  of  distribution, 
the  investigator  should  scrutinize,  the  market  outlets,  and  the 
volume  of  production  going  to  each  outlet,  that  is,  to  retailers, 
large  consumers,  manufacturers,  foreign  trade,  etc.  This  may 
well  be  charted.  In  the  case  of  food  products,  a  very  definite 
merchandising  system  of  jobber,  wholesaler,  and  retailer  is 
found.  This  system  has  been  complicated  lately  by  the  efforts 
of  the  chain  stores  to  buy  direct,  an  effort  which  has  been  accom- 
panied with  a  considerable  degree  of  success.  By  means  of  econo- 
mies effected  through  direct  purchasing,  chain  stores  are  enabled 
to  offer  goods  to  consumers  at  lower  prices,  this  being  true  even 
in  the  case  of  staple  goods.  Chain  stores  are  being  established 
in  lines  other  than  groceries  and  foodstuffs.  There  are  the  five- 
and-ten-cent  stores,  for  example.  The  manufacturer  must  decide 
whether  he  is  going  to  market  directly  through    these  agencies, 


268  MARKET  ANALYSIS 

or  cling  to  the  legitimate  outlets  sanctioned  by  custom  and  his 
competitors. 

There  are  certain  businesses  which  almost  demand  middlemen. 
For  instance,  indirect  selling  is  practically  imperative  when  there 
are  49,000  retailers  in  the  country  engaged  in  the  drug  business. 
A  prominent  manufacturer  of  soft  drinks,  on  the  other  hand,  has 
been  much  criticized  for  selling  through  a  large  chain  store  system 
while  at  the  same  time  selling  through  jobbers  yet  this  double 
policy  seems  to  have  met  with  success. 

It  may  be  a  question  of  selling  to  a  mail-order  house.  Legiti- 
mate dealers  are  quick  to  complain  of  this  practice  because  under- 
seUing  always  hurts  their  market,  although  to  what  degree  is  hard 
to  determine.  This  brings  up  the  question  of  the  degree  of 
prejudice  and  resistance  to  be  met  with  in  any  change  of  system. 
The  investigator  must  take  note  of  this  because  it  is  present 
and  very  real.  A  manufacturer  who  breaks  away  from  the  estab- 
lished custom  of  merchandising  has  only  the  success  of  his  policy 
to  stand  upon.  He  cannot  be  sure  of  sympathy  among  his  com-r 
petitors  or  the  erstwhile  members  of  his  merchandising  chain. 

The  question  of  quick  delivery  is  also  verj'-  important  in  some 
cases.  It  may  be  even  more  important  than  price  when  a  con- 
sumer wishes  immediate  delivery.  It  is  very  Hkely  that  in  this 
case,  a  system  of  indirect  distribution  would  be  the  only  remedy. 
When  the  producer  is  large  enough,  it  is  sometimes  feasible  to 
establish  branch  warehouses  throughout  the  country. 

In  a  study  of  indirect  distribution,  the  investigator  will  find 
'that  the  representation  of  affairs  as  they  actually  exist,  either 
graphically  or  in  writing,  will  give  him  the  best  starting  point 
upon  which  to  base  his  opinions. 

The  Jobber.  No  study  of  indirect  distribution  can  ignore 
the  jobber.  According  to  Charles  Coolidge  Parlin,  there  are 
three  distinct  jobber  types: 

(1)  The  local  jobber  who  may  live  in  an  interior  city  and  reach 
out  for  50  or  60  miles,  or  who  may  live  in  a  large  city  and  merely 
cover  that  city,  or  finally  who  may  live  in  New  York  and  merely 
cover  a  portion  of  the  city.  He  does  ordinarily  less  than  a  mil- 
lion dollars'  worth  of  business.  He  has  no  high-salaried  employees. 
His  delivery  expenses  are  small.  He  is,  in  short,  in  the  best 
position  to  sell  manufacturer's  brands  and  unbranded  staples. 


DISTRIBUTION  269 

(2)  The  sectional  jobber  who  is  ordinarily  located  in  a  city 
of  100,000  or  more.  He  frequently  covers  the  state  or  several 
states  and  seeks  to  put  out  under  his  private  brand  everything 
possible. 

(3)  The  national  jobber  who  distributes  a  narrow  line  of 
specialties  all  over  the  countiy. 

According  to  the  Curtis  sui-vey  on  textiles,  a  jobber's  terri- 
tory is  not  a  circle  but  rather  a  spider  web,  following  the  railroad 
lines,  radiating  away  from  the  central  market.  Perhaps  this 
tendency,  it  is  pointed  out,  will  disappear  with  the  growth  of 
the  motor  truck.  Here  the  surveyor's  map  of  distribution  will 
be  illuminating.  How  does  the  motor  truck  affect  his  dis- 
tribution? 

It  has  been  a  most  fruitful  cause  of  complaint  that  many 
jobbers  push  their  own  brands  in  preference  to  those  of  the  manu- 
facturers' brands,  which  they  handle  at  the  same  time,  in  spite 
of  those  brands  being  nationally  advertised.  Many  jobbers  of 
automobile  supplies  and  accessories  handle  competing  products 
at  the  same  time.  The  fact  that  they  push  one  brand  more  than 
another  is  mainly  dependent  on  the  discounts  allowed  the  jobber. 
Weighed  against  this  is  the  nationally  advertised  line,  which  he 
is  obhged  to  carry  in  order  to  satisfy  his  patrons. 

If  the  company  sells  through  jobbers,  the  important  ones 
will  be  found  to  be  listed.  Statistics  should  be  obtained  if  possi- 
ble as  to  the  size  of  jobbers'  stocks,  the  attitude  of  the  jobber 
towards  the  company,  the  turnover  of  the  company's  product 
in  the  jobbers'  hands,  the  geographical  distribution  of  jobbers,  etc. 

The  opinion  of  the  jobber  should  be  obtained  on  the  product, 
and  his  suggestions  should  be  given  careful  consideration.  Most 
jobbers  are  anxious  to  make  evident  the  value  of  the  service  which 
they  offer.  They  are  supposed  to  do  a  larger  business,  to  cover  a 
greater  territory,  and  to  be  in  closer  touch  with  the  factors  of 
demand  than  retailers.  If  the  company  makes  use  of  jobbers,  it 
should  at  least  take  advantage  of  the  services  which  they  have  to 
offer.     One  of  the  most  important  of  these  services  is  information. 

The  Retailer.  The  majority  of  the  products  with  which  the 
investigator  is  likely  to  come  in  contact  are  sold  through  retailers. 
It  is  through  the  retailer  that  personal  contact  is  maintained  with 
the  ultimate  consumer.     In  tlu^  old  days,  the  manufacturer  did 


270  MARKET  ANALYSIS 

his  own  retailing  from  the  front  of  the  estabhshment  and  manu- 
factured iu  the  rear.  He  knew  all  his  customers.  At  present  the 
manufacturer,  in  many  cases,  does  not  even  know  the  retailers. 
Personal  contact  has  been  lost  while  efficiency  and  large  scale 
operations  have  been  gained. 

It  is  upon  this  retailer,  however,  that  the  company  depends 
to  sell  its  merchandise.  For  this  reason  the  surveyor  should 
chart  the  geographical  distribution  of  retailers  and  the  relative 
density  in  certain  sections,  and  then  set  out  to  account  for  it. 
He  will  find  there  are  certain  retailers  who  normally  handle  his 
class  of  goods  exclusively,  say,  for  instance,  books.  In  large 
cities,  books  wiU  be  handled  in  stores  devoted  entirely  to  the 
sale  of  books.  There  will  be  other  retailers  who  deal  in  other 
goods  at  the  same  time.  The  department  stores  usually  have 
book  departments,  while  many  drug  stores  seU  cheap  reprints, 
etc.  The  manufacturer  of  books  must  take  into  consideration 
the  logical  retailer  and  the  special  retailer.  He  must  also  con- 
sider the  possible  retailer,  that  is,  one  who  does  not  already  handle 
this  class  of  goods  but  who  might  do  so.  The  drug  store,  for 
instance,  is  becoming  exceedingly  diversified  in  the  variety  of 
lines  which  it  offers  for  sale.  Many  great  business  successes 
have  been  made  by  opening  up  pioneer  channels  of  distribution. 

Ordinarily,  the  retailer  carries  articles  for  which  there  is 
already  a  demand,  or  for  which  someone  is  trying  to  create  a 
demand  through  advertising  or  other  methods.  There  is  much 
argument  in  favor  of  distributing  a  product  to  small  dealers 
rather  than  to  the  large  ones.  There  are  more  of  them;  their 
rate  of  turnover  is  often  more  rapid  because  of  limited  financial 
capacity,  and  it  is  perhaps  easier  to  get  cooperation  from  them. 
On  the  other  hand,  there  is  a  certain  amount  of  prestige  from 
having  the  big  stores  cany  the  product. 

Such  problems  may  well  be  approached  by  means  of  a  field 
survey.  In  field  surveys,  the  retailer  is  often  the  logical  point 
of  first  attack.  By  personal  interview,  a  great  many  interesting 
facts  may  be  learned,  and  valuable  criticisms  absorbed.  And, 
since  so  great  a  part  of  the  company's  prosperity  is  dependent 
upon  the  retailers'  attitude  towards  the  company  and  its  products, 
a  field  survey  of  this  kind  is  advisable  wherever  the  retailer  is  a 
logical  link  of  the  chain  of  distribution, 


DISTRIBUTION  271 

General  Conclusions.  A  word  of  warning  should  be  sounded 
here  against  too  radical  interference  with  distribution.  The 
structure  as  it  is  now  has  been  built  up  through  long  stages  of 
evolution,  and  cannot  be  changed  overnight.  It  is  like  the  human 
body.  It  is  a  frail  and  imperfect  organism;  yet  he  who  attempts 
to  improve  upon  it  can  never  hope,  through  the  employment  of 
sudden  and  radical  methods,  to  succeed. 

The  surveyor  started  with  a  small,  specific,  confined  study — 
the  product.  He  then  worked  into  the  more  general  phases  of 
the  marketing  problem.  He  is  now  coming  back  to  an  exceed- 
ingly definite,  clear-cut,  and  concrete  proposition.  This,  at  least, 
is  what  the  distribution  methods  should  be,  even  if  they  are  not. 

A  simple  expedient  for  finding  out  whether  distribution  is 
being  properly  taken  care  of  is  to  write  out  the  exact  methods  by 
which  it  is  handled  at  the  present  moment,  being  careful  to  include 
aU  exceptions  to  the  general  rule,  the  special  discounts  allowed  to 
this  jobber  or  that,  and  the  various  deviations  and  indirections 
which,  like  cobwebs,  mark  the  outworn  system.  The  mere  read- 
ing of  such  a  description  is  usually  sufficient  to  show  what  its 
imperfections  are.    They  become  self-evident, 


CHAPTER  XVII 
SALES  AND  ADVERTISING 

Outline 

How  is  the  character  of  the  sales  force  determined? 

(a)  What  is  the  influence  of  price  on  the  sales  department? 

(1)  The  high-priced  article  requires  a  high-priced  salesman. 

(2)  Cheap  article  may  or  may  not  require  expensive  sales  talent. 

(b)  How  does  the  tj^^e  of  the  product  influence  sales? 

(1)  Does  it  require  specially  trained  salesmen  to  demonstrate? 

(2)  Are  sales  made  entirely  to  women,  or  to  men? 

(c)  Size  and  weight,  what  influence  do  they  exert? 
(1)  Can  the  product  be  demonstrated? 

(d)  How  do  keeping  qualities  affect  the  sales  problem? 
(1)  How  fast  must  be  the  rate  of  turnover? 

(a)  Is  it  determined  by  time,  as  in  food  products? 
(6)  Is  it  governed  by  change  in  style,  as  in  millinery? 

What  are  the  company's  sales  policies? 

(a)  In  regard  to  the  jobber? 

(1)  What  terms  are  given  to  jobbers? 

(2)  What  is  the    jobbers'  percentage    of  profits  on  this  product  as 

compared  with  competing  products? 

(3)  How  is  the  jobber  protected  in  territory  and  price? 
(5)  In  regard  to  the  retailer? 

(1)  What  price  is  charged  retailers? 

(2)  Does  the  company  sell  through  exclusive  agencies? 

(3)  Is  there  a  discount  for  large  orders? 

What  sales  tests  might  be  practicable? 

How  much  of  the  company's  business  is  repeat  sales? 

(a)  Is  it  possible  to  get  more  sales  with  fewer  customers? 

What  is  the  purpose  of  the  company's  advertising? 

(a)  Is  it  educational? 

(1)  Does  the  company  need  to  stimulate  sales  through  educating  the 
public  as  to  the  use  of  its  product? 
272 


SALES  AND  ADVERTISING  273 

(b)  Is  it  protective? 

(1)  Is  it  necessary  to  prevent  consumers  being  weaned  away  by 
competitive  advertising? 

(c)  Is  it  to  develop  new  sales? 

(1)  Does  it  combat  competitors'  advertising? 

What  is  the  scope  of  the  advertising  appeal?   Does  it  depend  on 
(a)  The  distributive  facihties? 
(6)  The  nature  of  the  product? 
(c)   The  class  of  the  consumer? 

How  has  the  advertising  been  done? 

(a)  Through  an  agency? 

(b)  Independently? 

Does  the  advertising  appeal  correspond  with  the  motives  for  purchase  as 

determined  by  the  survey? 
To  whom  should  the  advertising  appeal  be  directed? 

(a)  To  the  ultimate  consumer? 

(6)  To  the  jobber? 

(c)  To  the  retailer? 

(d)  To  all  three? 

When  shall  the  company  advertise? 
What  should  be  the  media  of  publicity? 

(a)  National  papers  and  magazines? 

(b)  Trade  papers? 

(c)  Local  neswpapers? 

What  degree  of  cooperation  exists  between  the  functions  of  advertising  and 
(a)  Sales? 
(6)  Production? 
(c)    Purchasing? 

How  are  results  of  advertising  campaigns  checked  up? 


CHAPTER  XVII 
SALES   AND   ADVERTISING 

We  have  studied  the  product,  the  people  who  use  it,  and  the 
channels  through  which  they  are  to  receive  it,  but  we  have  not 
as  yet  examined  the  ways  of  bringing  it  to  their  attention,  that  is, 
the  sales  and  advertising. 

Defects  in  most  sales  departments  are  due  to  failure  to  push 
the  seUing  thoroughly,  rather  than  to  anything  fundamentally 
wrong  with  the  sales  plan.  On  the  other  hand,  the  success  of 
any  business  undertaking  depends  largely  on  the  ability  of  this 
department.  Does  the  present  sales  force  measure  up  to  the 
standard  required?   If  not,  wherein  does  it  fail? 

Mr.  Parhn,  of  the  Curtis  Pubhshing  Company,  says  sales 
success  depends  upon  four  factors:  First,  a  good  product;  second, 
correct  relations  with  distributive  factors;  third,  an  effective 
sales  organization;  and  fourth,  advertising  to  the  ultimate  con- 
sumer. All  four  of  these  factors  are  interdependent.  Many 
companies  realizing  the  unportance  of  such  coordination,  have 
developed  excellent  sales  departments;  and  it  is  hkely  that  the 
survey  will  point  to  improved  efficiency  in  the  present  plan  rather 
than  the  formulating  of  a  new  sales  plan. 

Whatever  decision  the  surveyor  may  reach  on  this  score  he 
must  go  carefully  over  the  whole  sales  organization  and  polic3^ 
Some  of  the  first  questions  he  will  have  to  ask  are:  How  is  the 
character  of  the  sales  force  determined?  What  are  the  company's 
sales  policies?  Are  there  any  practical  sales  problems  to  be  met? 
What  is  the  scope  of  the  advertising  appeal,  etc.? 

In  studying  the  character  of  the  sales  force,  there  are  a  number 
of  points  to  be  considered,  the  most  important  of  wliich  are  treated 
in  the  following  sections. 

1.  Price.  The  influence  of  price  on  the  sales  department  is 
twofold:  The  high-priced  article  nominally  requires  a  high- 
priced  salesman,  while  the  cheap  article  may  or  may  not  require 

274 


SALES  AND  ADVERTISING  275 

an  experienced  salesman.  High-priced  goods  are  ordinarily  sold 
in  small  quantities,  with  large  margin  of  profit  on  each  sale,  while 
low-priced  goods  depend  for  their  earnings  on  large  turnover 
with  small  margin  of  profit  per  sale. 

The  surveyor's  task  in  this  connection  is  to  ascertain  whether 
the  salesman's  compensation  is  fitted  to  the  product.  Obvi- 
ously, it  would  be  poor  policy  to  economise  on  salesmen  in  cases 
where  the  best  is  none  too  good.  Contrariwise,  it  is  equally 
poor  policy  to  employ  high-priced  salesmen  for  selling  which 
simply  necessitates  marking  down  the  order. 

2.  Type  of  Product.  The  type  of  the  product  may  have  a 
veiy  decided  influence  on  the  sales  organization.  Some  products 
are  of  such  a  nature  that  they  require  a  specialized  sales  depart- 
ment. The  maker  of  a  calculating  machine,  for  example,  should 
employ  salesmen  who  are  quick  at  figures  in  order  to  secure 
successful  demonstrations.  Another  sales  department  may  have 
to  be  qualified  to  appeal  to  an  exceedingly  Hmited  class.  A 
company  publishing  books  for  the  blind  has  such  a  highly  spe- 
cialized sales  problem. 

In  some  lines  of  work,  however,  the  necessity  of  having  tech- 
nically trained  salesmen  has  been  overdone.  In  marketing 
highly  scientific  apparatus,  such  as  X-ray  machines  for  medical 
use,  only  a  scientist  of  many  years'  training  would  understand 
at  all  thoroughly  the  electrical  phenomena  involved.  Hence, 
although  the  product  itself  is  of  a  highly  technical  nature,  the 
salesman  may  be  almost  altogether  a  commercial  man. 

The  product  may  be  of  such  a  nature  that  sales  are  made  by 
men  to  women,  or  vice  versa.  Such  a  sales  personnel  must  have 
certain  special  qualifications,  training,  and  address.  The  sur- 
veyor should  decide  in  his  own  mind  the  precise  requirements 
for  a  salesman  in  this  line,  and  put  these  requirements  into  writ- 
ing. They  may  assist  the  sales  manager  in  rating  his  staff,  and 
in  helping  him  pick  new  salesmen. 

3.  Size  of  Unit  Order.  The  price  of  the  individual  product 
is  not  always  the  criterion  of  whether  the  salesman  should  be 
high-priced.  After  the  surveyor  has  ascertained  from  the  sales 
department  the  amount  of  the  average  \mit  order,  he  will  be  in 
a  better  position  to  decide.  The  individual  product  may  be  very 
cheap,  such  as  shoe  naUs,  but  large  shoe  factories  place  single 


276  MARKET  ANALYSIS 

orders  for  them  by  the  million.  Such  products  are  not  sold 
individually.  And,  in  articles  of  this  nature,  especially  where 
competition  is  veiy  keen,  the  salesman  of  ability  is  worthy  of  the 
high  salaiy  which  he  commands. 

The  above  are  but  suggestions  as  to  factors  which  may  help 
determine  the  quahty  of  the  sales  personnel.  But  the  problem 
may  be  complicated  by  the  pecuhar  nature  of  the  product,  par- 
ticularly its  adaptability  for  demonstration  and  its  keeping 
qualities. 

In  regard  to  the  first  point — that  of  demonstrating  the 
product — heavy  articles  may  require  an  entirely  different  sales 
equipment  from  light  products.  Portabihty  plays  an  important 
part.  If  the  consumer  has  the  article  brought  to  him,  and  is 
able  to  see  it  in  action  he  is  more  readily  convinced  than  by 
much  sales  argument.  This  is  particularly  true  in  house-to- 
house  seUing.  Although  the  first  call  may  be  solely  to  secure  an 
opportunity  to  demonstrate,  as  in  the  case  of  vacuum  cleaners, 
washing  machines,  and  sewing  machines,  demonstration  is  rehed 
on  to  make  the  actual  sale. 

In  this  connection,  as  a  great  many  products  are  capable  of 
demonstration  in  some  way,  the  surveyer  may  be  able  to  make 
valuable  recommendations  along  this  line. 

The  ability  of  the  product  to  keep  for  a  long  time  has  also 
an  important  effect  on  the  sales  force.  In  the  case  of  food  products 
which  deteriorate  in  a  short  time,  selling  methods  must  be 
adopted  which  are  in  keeping  with  the  facts.  Baking  powder 
must  not  stay  on  the  shelves  too  long  or  it  will  deteriorate. 
Perishabihty  is  by  no  means  limited  to  food  products.  Photo- 
graphic fihns  and  rubber  goods  are  affected  by  time. 

The  salesman  of  a  perishable  commodity  must  not  sell  too 
much  at  a  time.  He  must  be  able  to  weigh  the  absorptive  power 
of  the  market  against  the  product's  abiUty  to  keep.  Anything 
in  which  fashion  plays  a  determining  part  must  be  kept  moving 
or  it  wiU  become  unsaleable. 

The  investigator  must  be  careful  in  his  consideration  of  the 
selling  force  to  study  one  more  vital  point — the  personality  of  the 
salesman.  Personal  considerations  enter  so  largely  into  selling 
that  it  is  not  unconunon  to  find  salesmen  drawing  salaries  or  com- 
missions 25  per  cent,  or  30  per  cent,  higher  than  is  warranted,  on 


SALES  AND  ADVERTISING  277 

account  of  having  potential  abilities  which  are  really  never  used  in 
selling  that  article.  The  man  who  has  the  entree  to  railroad 
presidents  might  be  veiy  cheap  at  $15,000  a  year,  although  the 
actual  salesmanship  required  after  the  interview  was  secured 
would  be  of  a  veiy  ordinary  type.  But  the  personnel  and  its 
correlation  with  the  product  is  only  one  angle  of  approach  to  the 
sales  problem.  In  addition,  we  must  reckon  with  the  company's 
sales  policy. 

The  Company's  Sales  Policy.  Every  company  has,  or  should 
have,  a  definite  sales  policy  in  accordance  with  which  the  sales 
manager  acts.  This  polic}^  may  be  a  relic  of  heredity  transmitted 
by  custom,  it  may  be  founded  on  the  predilection  of  the  executives, 
or  it  may  be  purely  empirical — the  results  of  experiments  which 
have  proved  successful.  In  some  cases,  unfortunately  rare,  it  is 
founded  on  accurate  analysis  of  the  product,  the  market,  and  the 
company's  capacity. 

What  is  the  company's  purpose  in  selling?  Does  it  aspire  to 
national  or  even  international  position?  Is  it  contented  with  the 
local  field?  If  it  intends  to  expand,  what  are  its  plans?  The  answers 
to  such  questions  will  help  the  investigator  to  know  what  he  must 
find  out. 

The  sales  program  will  extend  from  the  producer  himself 
down  through  the  distributive  mechanism  to  the  retailer.  At 
each  point  in  this  chain  the  market  engineer  should  obtain 
the  reaction  of  jobbers,  retailers,  and  consumers  on  the 
particular  portions  of  the  sales  policy  which  especially  afifect 
them. 

The  Jobber.  In  many  companies  the  sales  problem  is  vitally 
connected  with  jobbers.  The  highway  to  the  ultimate  consumer 
leads  via  the  jobber.  For  this  reason,  the  surveyor  must  pay 
careful  heed  to  his  position  in  the  sales  policies  of  the  company. 
What  terms  does  the  company  give  jobbers?  How  does  their 
percentage  of  profit  compare  with  the  percentage  of  profit  obtained 
from  competing  articles?  What  means  are  taken  for  protecting 
the  jobber,  both  as  to  his  territory  and  his  prices?  How  are  goods 
delivered  to  jobVjcrs?  How  is  the  company  regarded  among  the 
jobbers?  All  these  questions  and  more  must  be  answered  before 
the  surveyor  will  be  in  a  position  to  judge  accurately  and  impar- 
tially the  existing  state  of  affairs. 


278  MARKET  ANALYSIS 

He  must  remember,  In  studying  jobbers,  that  it  is  imperative 
for  the  company  to  have  their  goodwill.  They  often  have  it  in 
their  power  to  make  or  mar  the  success  of  a  product  in  a  certain 
district,  and  this  feeling  of  goodwill  is  largely  dependent  on  their 
treatment  by  the  company. 

A  great  deal  of  such  goodwill  comes  from  accurate  understand- 
ing between  manufacturer  and  jobber  of  where  each  one  stands. 
There  should  be  no  ambiguity  in  regard  to  the  share  of  each  in  sales 
activity. 

"  It  is  extremely  important,"  says  Arthur  Cobb,  Jr.,  "  to 
have  a  correct  mechanical  structure  for  the  manufacturer's  sales 
policy,  as  distinguished  from  the  personnel  or  human  element  of 
it."  Nowhere  does  this  apply  more  than  to  the  question  of 
jobbers.  Looseness  of  organization  which  would  not  be  tolerated 
in  an  up-to-date  factoiy  is  rife  in  distribution  fields.  It  is  the  usual 
practice  of  publishers,  for  instance,  to  sell  books  to  retail  book- 
sellers on  a  sliding  scale  of  discounts  ranging  from  25  per  cent,  on 
single  copies  up  to  40  per  cent,  or  more  on  100  copies  of  one  title. 
Only  a  few  publishers  have  a  separate  discount  for  the  jobber. 
Hence  the  only  way  a  bona  fide  jobber  can  make  a  living  in  the 
business  is  by  buying  in  large  quantities  at  the  top  discount  and 
re-seUing  in  small  quantities  at  or  above  the  pubHshers'  own  dis- 
counts for  these  quantities.  As  the  dealer  can  get  just  as  good 
a  price  as  the  jobber  when  he  buys  in  the  same  quantities,  there 
is  a  strong  tendency  to  buy  direct,  and  the  larger  a  dealer's  busi- 
ness is,  the  stronger  the  tendency  becomes. 

Such  a  system  may  be  well  enough,  since  it  "  fills  the  bill," 
but  what  will  happen  when  a  more  logical  plan  is  put  into  effect? 
It  is  questions  such  as  these  which  the  surveyor  must  face.  He 
must  ferret  out  the  faults  of  present  systems  to  lay  sounder  founda- 
tions for  those  to  come. 

The  Retailer.  Equal  or  greater  in  importance  are  the  functions 
of  the  retailers  and  their  connection  with  the  company.  It  is  true 
that  many  manufacturers  never  come  in  direct  contact  with 
retailers,  but  it  is  also  true  that  many  companies  deal  directly 
with  retailers.  One  of  the  first  questions  to  ask  is:  "  How 
thoroughly  has  the  company  canvassed  the  ground  for  retailers?" 
It  often  proves  to  be  the  case  that  only  the  "  high  spots  "  have 
been  touched,  either  through  lack  of  energy  on  the  part  of  the 


SALES  AND  ADVERTISING  279 

salesman,  or  negligence  on  the  part  of  the  sales  department  itself 
in  failing  to  take  advantage  of  its  opportunities. 

The  question  of  the  price  charged  to  the  retailer  is  often  the 
cause  of  dissension.  If  the  retailer  buys  direct,  does  he  get  the 
same  price  as  the  jobber,  or  does  he  have  to  pay  at  the  same  rate 
as  though  he  had  purchased  from  the  jobber?  Such  questions  are 
of  common  occurrence.  It  is  only  through  a  study  of  the  facts 
themselves  that  the  correct  answer  may  be  given. 

Does  the  company  grant  exclusive  agencies,  or  does  it  sell 
to  whatever  retailer  wishes  to  stock  the  goods?  Again  it  is  the 
policy  of  the  company  which  should  be  investigated.  Does  the 
company  sell  to  large  consumers  at  lower  cost,  and  what  has 
been  the  effect  of  that  policy?  The  surveyor  will  find  help  on 
these  heads  from  the  numerous  specialized  books  on  sales 
problems. 

The  surveyor  will  be  likely  to  find  in  the  majority  of  companies 
that  the  sales  policy  is  dictated  by  expediency.  But,  it  is  also  a 
fact  that  scientific  analysis  of  sales  problems  and  methods  is 
increasing  with  the  analysis  of  markets. 

Peculiar  Sales  Methods.  Some  companies  have  very  peculiar 
problems  to  meet  which  necessitate  specialized  sales  methods. 
For  instance,  fire  hydrants  are  chiefly  merchandised  to  muni- 
cipalities, and  require  an  unusual  kind  of  sales  machinery.  The 
sale  of  crude  rubber  is  largely  to  the  presidents  of  the  rubber 
companies,  who,  it  has  been  said,  are  the  "  highest  grade  pur- 
chasing agents  in  the  world."  There  is  also  the  case  of  the 
mechanical  salesman,  the  penny-in-the-slot  machine,  which 
exemplifies  an  out-of-the-ordinary  method  of  merchandising. 

In  any  event,  the  market  and  the  product  will  determine  the 
requirements  of  the  sales  organization,  and  if  it  has  not  been 
built  to  meet  them,  or  if  it  has  grown  beyond  them,  the  difficul- 
ties should  be  clear. 

A  factor  which  may  be  negligible  in  one  business  may  control 
another.  Sometimes  the  important  influences  are  hidden,  and 
it  is  the  research  man's  task  to  unearth  them.  A  survey  made  to 
determine  the  market  for  cereals  showed  that  corn  breakfast 
foods  were  in  the  ascendancy.  Investigation  showed  that  their 
growing  popularity  was  not  due  to  their  superior  flavor  or  nutri- 
tive properties,  but  mainly  because  they  were  the  quickest  to 


280  MARKET  ANALYSIS 

prepare.  The  j'ounger  generation  kept  later  hours  than  its 
forebears,  and  was  in  a  greater  hurry.  It  is  such  matters  as  these, 
obvious  enough  when  once  described,  which  make  or  break  whole 
industries. 

The  Value  of  Repeat  Sales.  The  sales  problem  usually  has 
two  aspects,  that  of  seeking  out  and  selling  to  new  and  original 
markets,  and  that  of  capturing  repeat  sales.  If  a  company  manu- 
factures a  product  that  lasts  a  lifetime,  or  perhaps  two  lifetimes, 
obviously  its  sales  problem  is  much  narrower  than  thatof  the  manu- 
facturer of  automobile  tires.  As  now  manufactured,  these  wear 
out  after  a  few  thousand  miles'  usage.  If  some  substance  were 
invented  which  would,  without  an  increase  of  price,  stand  up  twice 
as  long  as  present  materials,  giving  20,000  miles  of  service  instead 
of  10,000,  the  tire  industry'-  would  be  revolutionized,  as  the  repeat 
sales  would  be  cut  in  two. 

The  surveyor  should  endeavor  to  find  out  what  percentage 
of  his  company's  business  is  repeat  and  what  original.  Repeat 
sales  might  not  be  so  large  as  they  should  be  because  the  company 
was  spending  too  much  energy  in  looking  up  new  fields  for  sales 
exploitation.  The  point  is  that  it  is  often  better  to  keep  one 
customer  sold  than  to  get  ten  new  ones  on  an  original  sale  and  then 
lose  them  all.  Mr.  Ray  Giles  points  to  the  case  of  the  regular 
razor  company  which  sold  a  million  razors  in  a  year  but  every 
year  found  it  necessary  to  get  new"  customers,  while  the  manu- 
facturer of  a  safety  razor  by  selling  a  milhon  razors,  made  himself 
a  repeat  market  of  one  million  purchasers  of  razor  blades. 

Repeat  sales  may  be  pushed  in  several  ways — through  care- 
ful cultivation  of  goodwill,  identification  of  goods  through  trade- 
mark or  brand  name,  advertising  specifically  directed  towards 
the  actual  user,  etc. 

The  surveyor  will  perceive  that  the  problem  of  repeat  sales 
narrows  down  to  the  possibiHty  of  making  more  sales  to  fewer 
customers.  This  may  be  impossible,  as  in  the  case  of  furniture, 
pianos,  etc.,  where  the  original  market  is  the  only  one  worthy 
of  much  sales  effort.  But  where  repeat  sales  should  account  for  a 
large  part  of  the  business,  the  surveyor  should  ascertain  to  what 
degree  it  is  present. 

Advertising.  Market  surveys  are  ordinarily  made  to  extend 
or  reinforce  old  or  existing  sales  fields,  to  find  new  fields  for  the 


SALES  AND  ADVERTISING  281 

product,  to  determine  the  possibilities  for  selling  new  products,  to 
change  the  method  for  bringing  the  product  to  the  market,  or  in 
some  way  to  alter  or  modify  the  present  method  of  marketing 
goods. 

If  it  is  decided  to  alter  the  marketing  system,  it  becomes 
desirable  and  even  necessaiy  to  apprise  both  customers  and 
pubUc  of  these  plans.  Accordingly,  a  market  survey  of  this  nature 
leads  to  publicity.  If  it  is  decided  to  extend  the  field  for  the  old 
product,  it  is  a  matter  of  advertising,  or  greater  sales  effort  of 
one  kind  or  another.  If  it  is  a  matter  of  new  and  undeveloped 
fields,  the  accepted  manner  of  opening  up  new  fields  is  by  adver- 
tising. If  it  is  a  new  and  yet  unmarketed  product,  people  must 
be  told  about  it,  its  advantages,  what  it  costs,  and  where  it  may 
be  obtained.  If  methods  of  distribution  are  going  to  be  changed 
that  not  only  means  opening  up  the  new  channels,  but  also  making 
known  what  these  channels  are  and  how  they  are  going  to  operate. 

Purpose  of  Advertising.  The  purpose  of  advertising  ordi- 
narily is  to  promote  the  welfare  of  the  company  by  stimulating 
original  or  repeat  sales.  When  the  surveyor  approaches  this 
problem  of  advertising,  he  should  determine  whether  the  com- 
pany's publicity  in  the  past  has  been  directed  along  the  channels 
which  the  character  of  the  product  and  the  market  would  seem 
to  suggest  as  best.  In  other  words,  what  has  been  the  adver- 
tising policy  and  what  were  the  reasons  for  this  policy? 

Advertising  is  ordinarily  conducted  to  educate  the  pubHc 
to  the  advantages  of  a  product,  to  protect  a  market  already 
acquired  from  competitors,  or  to  develop  new  sales  for  a  new 
product.  These  are  the  principal  reasons,  although  there  may  be 
others.  The  purpose  of  the  advertising  to  a  great  extent  deter- 
mines its  subject  matter  and  the  appeal.  Therefore,  it  is  impor- 
tant for  the  surveyor  to  analyze  the  publicity  motives. 

1.  Educational  Advertising.  In  this  form  of  publicity,  the 
aim  is  to  educate  the  public  in  the  use  of  the  product,  so  that  sales 
will  naturally  follow.  As  such  advertising  is  likely  to  benefit 
competitors  as  well,  the  customary  method  now  is  to  form  an 
association  of  manufacturers  which  conducts  the  advertising  cam- 
paign jointly.  The  British  Trawlers'  Federation  has  attempted 
to  teach  the  English  public  how  to  cook  and  serve  fish.  A  similar 
campaign  has  been  conducted  in  the  United  States.     After  all, 


282  MARKET  ANALYSIS 

the  value  of  advertising  is  in  the  results  obtained  for  the  company, 
and  this  must  be  the  surveyor's  criterion.  He  is  not  expected 
to  be  an  expert  on  advertising  problems.  His  function  is  merely 
to  point  out  the  relation  between  facts  and  results  upon  which  the 
advertising  campaign  is  built. 

2.  Protective  Advertising.  After  the  public  has  become  thor- 
oughly convinced  of  the  merits  of  a  product,  and  habituated  to 
its  use,  there  is  still  the  necessity  for  continuing  the  advertising 
appeal.  Continuity  and  iteration  are  by-words  of  modem 
advertising. 

Protective  advertising  prevents  consumers  from  being  weaned 
away  by  competitive  advertising.  There  are,  of  course,  other 
sorts  of  protective  advertising.  The  Ilhnois  Central  Railroad, 
for  example,  has  advertised  in  newspapers  to  reduce  the  number 
of  accidents  at  grade  crossings,  and  thereby  to  protect  itself 
against  a  source  of  dangerous  financial  losses. 

Here,  as  elsewhere,  the  surveyor  must  not  merely  accept  the 
company's  advertising  at  its  face  value,  but  must  inquire  into 
its  fundamentals.  Why  are  we  advertising?  What  is  the  under- 
lying purpose  of  our  campaign?  What  is  the  immediate  purpose 
of  any  given  advertisement?  Do  we  expect  to  create  a  powerful 
but  temporary  effect,  or  one  which  is  milder  but  more  permanent? 
If  we  are  advertising  to  protect  ourselves  against  competitors, 
what  is  their  method  of  pubHcity,  and  how  does  it  compare  with 
ours?  The  survej^or  will  find  it  helpful  to  propound  such  questions 
as  these,  to  obtain  answers,  and  to  put  his  findings  into  writing. 

He  will  be  quite  sure  to  find  himself  in  close  contact  with  the 
advertising  department,  and  should  be  one  of  its  ablest  advisers. 
Although  probably  not  an  expert  on  the  technique  of  advertising, 
yet  he  should  be  competent  to  lay  all  the  foundations  upon  which 
advertising  is  built.  This  is  often,  in  fact,  the  market  engineer's 
first  function.  He  should  keep  in  mind  that  the  survey  is  not 
built  upon  the  advertising,  but  that  the  advertising  is  built  upon 
the  survey. 

3.  Developing  New  Sales.  Protective  advertising  may  be 
looked  upon  as  the  defense  of  old  sales  fields.  But  in  order  to 
develop  new  sales,  offensive  tactics  must  be  used.  The  surveyor 
will  find  that  the  policy  of  such  a  campaign  will  be  in  some  meas- 
ure determined  by  the  amount  of  competition  already  in  the  field. 


SALES  AND  ADVERTISING  283 

If  this  is  considerable,  the  advertising  will  probably  be  somewhat 
argumentative  in  nature,  whereas  if  the  territory  is  virgin,  the 
educational  element  will  be  more  prominent. 

Some  advertising  may  combine  several  motives.  A  new  adver- 
tising campaign  will  test  the  surveyor's  resourcefulness.  He  will 
find  it  desirable  to  review  all  his  various  findings  in  the  light  of 
publicity  requirements.  The  product,  the  company,  customers, 
competition — all  the  various  factors — will  play  a  part  in  molding 
the  new  campaign. 

Character  and  Scope  of  Advertising.  Once  the  surveyor  has 
found  out  why  the  company  is  advertising,  it  is  much  easier  for 
him  to  study  the  character  and  scope  of  the  advertising.  He 
should  ascertain  through  what  media  the  company  has  been 
approaching  the  market,  and  to  what  public  these  media  appeal. 
He  must  find  out  whether  the  appeal  has  been  local  or  sectional, 
national  or  international,  and  whether  directed  at  jobbers,  retail- 
ers, or  consumers.  Has  advertising  been  conducted  through 
an  agency  or  through  the  company's  own  advertising  department? 

Advertising  agencies,  originally  space  brokers,  have  developed 
into  a  very  thorough  and  effective  service.  They  are  both  general 
and  special,  that  is,  some  agencies  deal  in  all  sorts  of  products, 
and  some  confine  themselves  to  special  industries. 

The  scope  of  the  advertising,  considered  territorially,  should 
depend  first  on  the  ability  of  the  company  to  distribute.  National 
advertising  is  rarely  feasible  for  any  product  not  capable  of 
national  distribution.  The  surveyor  will  already  have  data  on 
this  subject  at  hand.  It  will  also  depend  on  the  company's 
ability  to  produce  and  take  care  of  orders,  on  what  credit  risks 
it  is  desireable  to  run,  etc.  It  is  a  question  of  suiting  the  com- 
pany's facihties  and  potentiaHties  to  the  specific  problem,  in  this 
instance,  advertising. 

The  Advertising  Appeal.  Most  advertising  campaigns  have 
some  dominant  note  which  is  stressed.  This  may  be  the  service 
rendered  by  the  product,  it  may  be  its  high  quality,  it  may  be  the 
cleanliness  with  which  it  is  manufactured,  it  may  be  its  beauty, 
or  it  may  be  anything  which  to  the  point  of  view  of  the  adver- 
tising agency  or  department  appears  the  paramount  consideration 
in  the  eyes  of  the  purchasing  public. 

Now,  it  is  too  often  the  case  that  this  stressed  motive  of  pur- 


2S4  MARKET  ANALYSIS 

chase  is  not  ascertained  by  scientific  methods.  There  seems  to 
be  no  other  accurate  way  of  determining  it  other  than  by  a  mar- 
ket analysis.  An  appeal  gone  wrong  may  mean  the  loss  of 
thousands  of  dollars  in  advertising  wasted.  What  the  public 
likes  about  that  product,  not  what  a  few  individuals  like  about 
it,  is  the  thing  to  find  out. 

National  advertising  has  fallen  into  disrepute  in  some  quarters 
because  of  the  failure  of  companies  that,  for  one  reason  or  another, 
did  not  succeed  in  reaching  the  public.  It  may  have  been  lack 
of  distributive  facilities  or  it  may  simply  have  been  a  failure  to 
understand  properly  the  motives  for  purchase.  There  must  be 
some  connection  between  these  motives  and  the  advertising 
campaign. 

The  appeal  must  be  made  to  the  right  sector  of  the  public. 
According  to  the  investigation  made  by  the  Nast  publications 
of  the  market  for  electrical  appHances,  the  point  is  stressed  that 
it  is  better  to  advertise  in  a  class  magazine  reaching  95  per  cent,  of 
the  homes  wired  than  in  the  average  mass  magazine  which  reaches 
only  about  25  per  cent,  of  live  prospects,  since  it  is  plain  that 
electrical  appliances  can  be  sold  only  to  persons  whose  homes  are 
wired.     See  table,  Fig.  45. 

Although  this  survey  was  made  wdth  the  express  purpose  of 
showing  how  quality  magazines  reached  a  certain  class,  yet  it  is 
valuable  to  the  surveyor  since  it  demonstrates  clearly  that  there 
is  such  a  thing  as  scientific  choosing  of  the  media  which  reach 
the  logical  market  for  the  product. 

But  advertising  appeals  are  constantly  changing,  because 
human  motives  themselves  change.  Ten  years  ago  the  accepted 
way  to  sell  a  washing  machine  was  to  force  it  upon  a  few  families 
in  the  community,  and  to  let  them  advertise  it  by  word  of  mouth. 
Advertising  then  was  educational.  It  has  now  changed  its 
appeal  to  a  stressing  of  the  points  of  excellence  of  the  different 
makes.  It  is  not  so  much  a  question  of  convincing  the  average 
individual  that  he  needs  a  washing  machine  as  of  convincing  him 
he  wants  a  particular  make  of  w^ashing  machine. 

The  surv^eyor  should  be  able  to  tell  with  Httle  difficulty  what 
the  logical  advertising  appeal  should  be.  He  has  obtained  all 
the  necessary  facts  from  his  study  of  the  product,  the  methods  of 
distribution,  and  the  market.     He  should  be  able  to  pass  judg- 


SALES  AND  ADVERTISING  285 

ment  upon  present  advertising,  and  say  wherein  it  is  lacking  in 
conformance  to  the  facts  as  disclosed  in  the  investigation. 

Advertising  Policies.  To  whom  is  the  company  going  to 
advertise?  Where  distribution  is  direct,  naturally  it  will  be  to 
the  ultimate  consumer.  But  even  in  the  case  of  indirect  dis- 
tribution, companies  frequently  advertise  to  the  consumer  in  the 
belief  that  if  he  is  convinced  of  the  value  of  this  product,  and 
wishes  to  purchase  it,  then  the  dealer  and  jobber  will  fall  into  line 
without  difficulty.  It  is  claimed  that  the  average  jobber  and 
retailer  prefer  to  handle  such  a  nationally  advertised  product 
because  their  selling  problem  is  made  easier.  But  this  is  by  no 
means  universal.  The  margin  of  profit  from  nationally  adver- 
tised goods  may  be  too  small  to  suit  him.  The  surveyor  must 
find  out  the  facts  which  prevail  in  the  specific  instance. 

Advertising  to  the  retailer  has  proved  productive  of  results 
in  many  cases.  The  same  applies  to  the  jobber,  although,  as  a 
general  rule,  the  jobber  will  handle  only  what  he  thinks  he  can 
sell  without  too  much  effort. 

The  surveyor  will  do  well  to  analyze  the  advertising  of  com- 
petitors, ascertain  to  whom  their  advertising  is  directed,  and  the 
nature  of  its  appeal.  He  will  generally  find  a  direct  connection 
between  the  class  of  advertising  and  the  prosperity  of  the  com- 
pany in  the  industry.  That  is,  the  most  successful  companies  will 
follow  more  or  less  along  the  same  advertising  track.  In  some 
industries,  the  firms  that  do  not  advertise  at  all  may  be  most 
successful.  But  the  surveyor  cannot  fail  to  get  interesting 
impressions  from  any  study  of  what  advertising  competitors  are 
doing. 

When  to  advertise  is  another  important  question.  In  indus- 
tries where  buying  is  seasonal  or  periodical,  there  has  been  great 
discussion  as  to  whether  advertising  should  be  continuous  or 
merely  done  previous  to  the  buying  season.  This  brings  us  to  the 
question  of  checking  up  advertising  results.  In  some  cases,  such 
as  educational  advertising,  it  is  undeniably  difficult  to  trace 
direct  results,  but  there  are  many  checking  systems  in  use  which 
take  care  of  the  ordinary  case. 

The  Need  for  Cooperation.  The  mistakes  of  advertising  show 
more  clearly  than  anything  else  how  great  a  need  for  cooperation 
exists  between  the  various  departments.     There  have  been  many 


286 


MARKET  ANALYSIS 


Analysis  of  D'W'ellings  Wired 

Together  with  Results  of  Investigation  of  8358  VocrE,  Vanity 


Cities 


^  > 

S>02 


SO 


VOGTTE 

Homes,  % 


Vanity  Faik 
Homes,  % 


Connecticut 
Greenwich.  . 
New  Haven. 


Stamford 

DiST.   CoLrMBIA 

Washington. . . 
Illinois 

Evanston 

Glencoe 

Highland  Park 
Lake  Forest. .  . 

Oak  Park 

Willmette.  .  .  . 

M-VSS.YCHUSETTS 

Boston 

Brookline. . 
Back  Bay . . 
Newton ... 
Springfield. 
New  Yobk 

Buffalo 

Rochester.  . 
Utica , 


Albany 

Troy 

Mt.  Vernon. . . . 

Pelham 

Larchmont .  .  .  . 

New  Rochelle.  . 
Ohio 

Cleveland 

Columbvis 

New  Jersey 

Newark 

New  Brunswick 

Red  Bank 

Plainfield 

Elizabeth 

Oranges 

Paterson 

Pennsylvania 

Philadelphia.  .  . 

Pittsburgh 

Rhode  Island 

Pro-vidence.  .  .  . 
Wisconsin 

Madison 


Totals . 


20,000 
162,519 

45,000 

437,571 

37,215 

3,381 

6,167 

■     4,255 

50,000 
8,314 


133,000 

600,000 
295,750 
105,000 

115,000 
82,823 
47,000 
t3,000 
tl.oOO 
45,000 

1,200,000 
240,000 

439,681 
50,000 
16,303 
37,084 

116,476 
94,918 

135,866 

1,823,000 
1,500,000 

300,000 

51,000 


4.5 
4.5 


4.5 
4.0 


5.0 
4.5 
4.5 

4.5 
4.5 
4.5 


4.5 

4.5 
4.0 


6.0 
4.5 
4.5 
4.0 
4.5 
4.5 
4.5 


4.5 
5.0 


4.5 
4.5 


4,444 
36,116 

10,000 

109,392 

9,304 
845 
1,542 
1,064 
12,500 
2,079 


277,555 


30,000 

120,000 
65,550 
23,333 

25,555 
18,405 
10,444 


10,000 

266,666 
60,000 

73,261 
11,111 
3,620 
9,271 
25,865 
20,970 
30,190 

405,111 
300,000 

66,666 

11,333 


3,217 
15,000 

4,500 

25,000 

7,078 
747 

1,363 

790 

11,096 

1,790 


71,806 

17,000 

60,000 
25,000 
14,383 

8,247 
3,500 
4,600 

4,500 

152,000 
29,000 

23,3.30 
4,700 
2,287 
4,800 
7,798 
9,275 
8,000 


9,456,823 


2,052,192 


763,458    37 


23 


110,000;    27 
95,000    32 

30,000 

7,651 


43 


43 

186 

162 
24 
49 
49 
65 
25 

65 
158 
109 

20 

77 

17 
194 
63 


49 
36 
23 
10 
58 

167 
128 

95 
13 
13 

54 

14 

150 

48 

152 
191 

147 

43 


164 

162 
24 

48 
49 
64 
25 

64 

148 

105 

20 

76 

161 

194 

61 

72 
41 
36 
23 
10 
56 

158 
126 


12 
13 
50 
14 
139 
48 

132 
187 

139 

43 


88 

100 
100 

98 
100 

99 
100 

98 
93 
96 
100 
99 

92 

100 

97 

82 

84 

100 

100 

100 

97 

95 

98 

93 

95 
100 

93 
100 

93 
100 


95 
100 


32 
103 


80 
14 
11 
13 
33 
10 

63 

139 

117 

8 

79 

106 
112 
46 

58 
42 
40 
19 
12 
49 

169 
135 

81 
15 
8 
31 
27 
90 
23 


87     164 
98     187 


3075 


120 
39 


22 


80 
14 
11 
13 
33 
10 

60 

125 

110 

8 

78 


103      97 

110!     98 

44      96 


49 
32 
39 
19 
12 
46 

160 
132 

66 
15 
8 
31 
26 
84 
23 

163 

184 

109 
39 


*  In  the  following  cities  only  a  part  of  the  subscribers  were  checked: 
Washington  in  alphabetical  order  through  letter  P. 
Boston  all  in  postal  station  M. 
Back  Bay  in  alphabetical  order  through  letter  R. 

t  Exact  population  not  available. 


Fig.  45. 


SALES  AND  ADVERTISING 


287 


IS  37  Cities  of  the  United  States 

Fair  and  House  and  Garden  Homes  *  in  these  Cities 


Total  Vogue, 

Home  Garden 

Vanity  Fair  and 

Homes, 

% 

Home    Garden 

Homes,  % 

Light 

Cooking  and  Heating  Rates 

T3 

■a 

-0 

T3 

Hate 

m 

<D 

m 

OJ 

ID 

^ 

l~, 

^ 

-Q 

3 

^ 

^ 

3 

m 

1 

1 

47 

44 

94 

122 

115 

94 

15^ 

10-7,!  according  to  consumption 

80 

76 

96 

272 

259 

96 

7i 

100  KW.  at  7,!,  next  400  at  5,!,  next  1000  at 

4,! 

40 

37 

93 

108 

100 

93 

12(i 

10  and  7,!  according  to  consumption 

200 

173 

87 

592 

513 

87 

10,! 

3,! 

137 

137 

100 

379 

379 

100 

37 

37 

100 

75 

75 

100 

28 

27 

96 

88 

86 

97 

10,! 

3i 

11 

11 

100 

73 

73 

100 

47 

45 

96 

145 

142 

98 

35 

35 

100 

70 

70 

100 

57 

55 

96 

185 

179 

97 

116 

111 

96 

413 

384 

93 

10,! 

Qi  for  23  to  103  KW. 

87 

84 

96 

313 

299 

96 

6,!  for  103  KW.  and  up. 

32 

32 

100 

60 

60 

100 

60 

56 

93 

216 

210 

97 

10,! 

6,! 

m  for  180  K.Wup. 

102 

97 

95 

383 

361 

95 

8,! 

8,!  for  60  KW.,  4,!  for  next  120  KW. 

157 

156 

99 

463 

460 

99 

8,! 

60 

59 

98 

169 

164 

97 

11,!  for 
60  KW. 

Sep.  met.  7.5,!  for  50  KW.,  6.5,!  for  50KW. 
and  up 

65 

58 

89 

211 

179 

86 

8,! 

Sliding  scale  down.      3,!  over  310  KW. 

49 

39 

80 

140 

112 

80 

9,! 

5,! 

56 

55 

98 

132 

130 

98 

37 

37 

100 

79 

79 

100 

1st  800  KW.  at  12,!  per  KW. 

37 

37 

100 

59 

59 

100 

Decrease  of  1^  on  each  additional  50  KW. 

95 

95 

100 

202 

197 

98 

142 

134 

94 

478 

452 

95 

5  and  3,! 

Minimum  rate  3^ 

137 

133 

97 

400 

391 

98 

7,! 

7i 

96 

84 

88 

272 

238 

88 

13 

12 

92 

41 

39 

95 

17 

15 

88 

38 

30 

95 

63 

61 

97 

148 

142 

96 

10,! 

lOi 

45 

40 

89 

86 

80 

93 

143 

135 

96 

383 

358 

93 

57 

57 

100 

128 

128 

100 

82 

75 

91 

398 

370 

90 

9,! 

H 

154 

149 

97 

532 

520 

98 

0,! 

H 

115 

114 

99 

382 

362 

95 

10,! 

$2.00  flat  +m  per  KW. 

41 

39 

95 

123 

121 

98 

10,! 

10,! 

2777 

2641 

95 

8358 

7922 

96 

Buffalo  in  alphabetical  order  through  letter  K. 
Cleveland  in  alphabetical  order  thrf)ugh  Station  E. 
Philadelphia  in  ali)habcti(al  f)rder  through  Station  C. 
Pittsburgh  in  alphabotiral  order  through  Station  East  Liberty. 


Fig.  45, 


288  MARKET  ANALYSIS 

recorded  instances  of  advertising  a  product  which  never  appeared 
on  the  market.  Just  prior  to  the  war,  a  well-known  manufacturer 
of  automobile  accessories  decided  to  put  on  the  market  a  new 
phonograph  and  advertised  all  over  the  country  to  this  elTect. 
These  were  never  made  or  sold.  Apparently  this  money  was 
wasted.  A  more  recent  example  has  been  in  the  automobile 
industry,  several  members  of  which  announced  cars,  through 
extensive  advertising,  which  never  appeared. 

It  would  normally  be  supposed  that  the  highest  degree  of 
cooperation  "existed  between  the  sales  and  advertising  department, 
yet  recently  a  page  advertisement  of  an  article  of  apparel  appeared 
in  the  New  York  Theatre  programmes,  but  not  a  single  article 
of  the  kind  advertised  was  to  be  had  in  the  city.  Another  mistake 
of  the  same  kind  was  evident  when  inquiry  at  six  large  depart- 
ment stores  in  one  of  the  largest  cities  of  the  East  failed  to  disclose 
any  hosiery  made  by  a  company  doing  extensive  advertising  in 
national  media.  These  two  instances  show  how  important 
coordination  is  in  advertising.  All  efforts  expended  in  rousing 
sales  interest  fail  if  the  company  is  not  prepared  to  manufacture 
and  distribute  to  meet  the  demand. 

General  Conclusions.  The  task  of  the  surveyor  in  sales  and 
advertising  is  largely  one  of  correlation.  He  will  seldom  find  a 
radical  change  necessary.  But  it  will  often  be  found  that  depart- 
ments are  working  at  cross  purposes,  each  doing  its  best  for 
success,  but  each  failing  to  take  into  consideration  the  efforts 
of  the  other. 

Advertising  is  ordinarily  a  matter  of  company  policy.  There 
are  strong  prejudices  to  encounter  and  overcome.  In  approach- 
ing this  problem,  the  surveyor  should  be  extremely  careful  to 
back  up  all  statements  by  facts  and  authority  so  incontestable 
that  there  can  be  no  question  as  to  their  vaHdity. 


CHAPTER  XVIII 
FOREIGN  MARKETS 

Outline 

Why  is  analysis  of  foreign  markets  important? 

(a)  Different  races. 

(b)  Different  languages. 

(c)  Different  customs. 

(d)  Different  methods  of  merchandising,  etc. 

Wherein  lies  the  importance  of  preliminary  analysis? 

(a)  The  necessity  of  a  selection  from  possible  markets. 

(b)  The  desirability  of  careful  planning. 

(c)  What  determines  the  choice  of  territory? 

(1)  Is  it  the  nature  of  the  product? 

(2)  Is  it  existing  foreign  conditions? 

What  is  the  problem?   Does  it  depend  on  whether 

(a)  The  company  has  already  established  foreign  connections? 
(6)  The  company  has  never  entered  the  field? 

Must  the  product  be  modified  for  foreign  markets? 

(a)  Is  there  anything  in  the  customs,  language,  or  buying  habits  of  the 
country  which  would  preclude  its  sales  in  present  form? 

(6)  Should  the  foreign  public  be  educated  to  the  product  or  should  the 
product  be  changed? 

(c)  Will  details,  such  as  color,  have  to  be  changed  to  suit  foreign  taste? 

(d)  Are  there  different  uses  for  the  product  abroad? 

(e)  Does  the  measure  or  size  of  the  product  conform  to  foreign  standards? 
(/)   Must  product  be  packed  in  special  way? 

How  is  the  company  concerned? 

(a)  Does  location  of  the  company  make  it  easier  or  harder  for  its  foreign 

trade? 

(b)  Can  the  company  finance  foreign  trade? 

(c)  Can  the  company  manufacture  a  product  to  suit  the  foreign  market? 

289 


290  MARKET  ANALYSIS 

What  conditions  exist  in  the  industry  abroad? 

(a)  Has  industry  prospered? 

(6)  Is  there  a  tendency  towards  concentration? 

What  are  the  bases  of  competition  abroad? 

(a)  Are  there  different  bases  in  different  countries? 

(b)  Are  new  products  at  a  disadvantage? 

(c)  Is  there  danger  of  the  product's  being  superseded? 

How  shall  customers  be  obtained? 
(a)  W^hat  are  credit  problems? 

Who  is  going  to  buy  the  product? 

(a)  Does  class  play  a  large  part? 

(6)  Is  there  a  great  deal  of  illiteracy?  etc. 

What  is  the  nature  of  the  market? 

(a)  WTiat  is  the  actual  purchasing  population? 

(b)  How  hard  is  the  market  of  access? 

What  are  the  potentialities  and  limitations  of  the  foreign  market? 
How  shall  the  sales  problem  be  solved? 

(a)  Shall  the  company  sell  directly? 

(b)  Shall  it  sell  indirectly? 

(1)  Through  exporters? 

(2)  Through  manufacturers'  agents? 

(3)  Through  commission  men" 

(4)  Through  other  channels? 

(c)  How  shall  the  problem  of  samples  for  salesmen  be  met? 

(d)  Must  the  carton  be  made  up  specially? 

How  are  pubUcity  methods  different  from  those  in  use  in  this  country? 
How  shall  data  be  secured? 

(a)  WTiat  are  the  bibUographical  sources  of  information? 

(1)  Statistical. 

(2)  Geographical. 

(3)  Directories. 

(4)  Annuals. 

(5)  Customs  tariffs. 

(6)  Information  on  file  at  Bureau  of  Foreign  and  Domestic  Commerce. 

(b)  What  are  the  requisites  of  the  foreign  questionnaire? 

(1)  In  language  of  country  of  destination. 

(2)  ExpUcit,  complete,  and  courteous. 

(3)  Sufficient  postage. 


FOREIGN  MARKETS  291 

(c)  To  whom  should  foreign  questionnaires  be  sent? 

(1)  American  consuls. 

(2)  Exporters. 

(3)  Dealers. 

(4)  Competitors  abroad. 

(5)  American  consuls  in  foreign  countries. 

(6)  Foreign  consuls  and  trade  information  bureaus  in  this  country. 

(7)  American  Chambers  of  Commerce  abroad. 

(8)  Foreign  trade  experts. 


CHAPTER  XVIII 
FOREIGN   MARKETS 

Business  is  no  longer  contained  within  city,  state,  or  national 
limits.  The  industries  of  the  United  States  have  outgrown  home 
consumption;  they  are  dependent  for  prosperity  on  foreign 
demand.  We  have  joined  England  and  Germany  among  the 
exporting,  rather  than  the  importing  nations.  The  time  when 
home  consumption  would  take  care  of  the  great  bulk  of  our  pro- 
duction is  past.  It  is  said  that  the  shoe  factories  of  the  country, 
if  operated  at  full  capacity  for  six  months,  would  supply  the 
demand  in  this  country  for  one  year.  The  same  is  rapidty  becom- 
ing applicable  to  the  automobile  industry,  and  to  others. 

Thus,  foreign  markets,  their  scope,  their  nature,  their  demands, 
the  restrictions  upon  them,  and  the  competition  to  be  encoun- 
tered, are  matters  of  prime  importance  to  a  great  many  manufac- 
turers. 

Foreign  markets  differ  from  ours  in  many  respects,  as  many 
would-be  exporters  have  found  to  their  cost.  Failure  to  under- 
stand markets  abroad  is  attended  with  even  more  disastrous 
results  than  a  similar  failure  to  understand  domestic  markets 
would  entail.  Not  only  are  the  people  different,  the  customs 
different,  and  in  many  cases  the  language,  but  there  are  different 
standards  of  living,  different  tastes,  different  methods  of  mer- 
chandising, etc. 

It  is  needless  to  emphasize  the  importance  of  a  foreign  market 
survey  for  those  intending  to  enter  foreign  fields.  No  amoimt  of 
hard-headed  business  sense  will  make  up  for  this  deficiency.  If 
it  is  difficult  to  understand  markets  at  home,  it  is  much  more 
difficult  to  understand  them  at  a  distance  of  thousands  of  miles. 
An  analysis  of  the  foreign  market  costs  more,  takes  longer,  and  is 
more  uncertain  in  results  than  any  domestic  survey.  And  yet 
without  one,  it  would  be  foolhardy  to  enter  the  foreign  field. 

292 


FOREIGN  MARKETS  293 

How  a  Foreign  Market  Survey  is  Made.  In  general,  the 
foreign  market  analysis  follows  the  plan  outlined  for  the  domestic 
survey.  The  problems  are  usually  more  difficult  to  solve,  owing 
to  the  necessity  of  relying  on  the  evidence  of  others  rather  than 
on  personal  first-hand  investigation. 

The  preliminary  analysis  becomes  of  greater  importance  in 
the  foreign  survey  than  in  the  domestic.  It  is  a  question  of 
making  a  selection  of  the  fields  to  investigate.  Few  companies 
will  have  capital  or  time  to  spend  in  analyzing  the  whole  world. 
The  aim  is  to  pick,  out  of  the  possible  markets,  those  which  show 
signs  of  being  potentially  the  most  profitable. 

The  product  must  be  studied  from  the  foreign  viewpoint,  both 
as  to  use  and  limitations,  and  to  appearance,  packing,  deteriora- 
tion, etc.  There  is  no  use  trying  to  sell  foreigners  what  they  do 
not  want.  Educational  publicity  is,  as  a  rule,  too  expensive. 
It  is  much  simpler  to  give  them  what  they  are  used  to  and 
familiar  with. 

The  company  must  be  viewed  carefully,  taking  into  considera- 
tion its  location  and  the  freight  rates  to  different  countries,  its 
facilities  for  production,  etc.  The  industry  in  general  as  it  is 
developed  abroad  is  important.  Competitors,  including  both 
companies  in  the  same  line  of  business  which  are  exporting 
abroad,  and  foreign  companies  doing  business  there,  must  be 
carefully  studied. 

The  company  may  already  have  connections  abroad  and 
customers  with  whom  it  has  done  business,  either  regularly  or 
intermittently.  If  this  is  not  the  case,  then  the  investigator  must 
consult  foreign  trade  directories,  find  the  names  of  possible  cus- 
tomers, get  in  touch  with  them,  and  sound  out  the  situation  for 
himself. 

The  foreign  market  is  very  different  from  the  domestic.  It 
is  not  one  market.  It  is  a  vast  variety  of  markets.  Every 
country  presents  its  own  problems.  There  are  racial  and  religious 
prejudices  to  consider,  there  are  seasonal  requirements  different 
for  each  country,  there  are  rules  of  procedure  to  follow  out. 
Naturally,  no  company  would  attempt  to  enter  every  foreign 
field  simultaneously ;  yet  the  surveyor  may  be  called  upon  to  make 
a  reconnaissance  of  the  world-field,  in  order  to  determine  the 
logical  country  in  which  to  begin  sales  and  operations. 


294  MARKET  ANALYSIS 

Merchandising  methods  are  quite  distinct  abroad.  The 
credit  problem  is  enhanced.  The  processes  of  distribution  are 
involved.  Sales  present  many  difficulties.  Publicity  is  con- 
ducted, even  in  England,  differently  from  ours.  Language 
presents  many  barriers. 

There  are  certain  routine  sources  of  obtaining  data,  and  there 
are  individual  ones  for  each  country.  Fortunately,  information 
is  not  usually  difficult  to  obtain,  but  it  takes  a  long  time.  Much 
more  time  must  be  allowed  for  a  thorough  foreign  market  survey 
than  for  a  domestic  one. 

The  Preliminary  Investigation.  Preliminary  analysis  is  essen- 
tial in  foreign  surveys.  There  are  so  many  different  countries 
which  might  be  investigated,  and  so  many  different  things  to 
study  in  each  country,  that  the  function  of  the  preliminary  work 
is  to  weed  out  the  most  desirable  opportunities.  Ordinarily,  the 
nature  of  the  product  determines  the  foreign,  just  as  it  does  the 
domestic  market.  Actually,  the  choice  of  territory  depends  on 
the  nature  of  the  product  and  the  existing  foreign  conditions. 
As  one  of  the  government  pamphlets  points  out,  it  is  not  to  be 
expected  that  flannel  underwear  can  be  sold  in  Egypt  or  heating 
stoves  in  Java,  although  both  have  been  tried.  Thus,  the  nature 
of  the  product  will  eliminate  a  great  many  countries  at  the  out- 
set. The  existing  conditions  which  might  preclude  successful 
trading  are  many  and  diverse.  For  example,  there  would 
ordinarily  be  no  object  or  profit  in  attempting  to  enter  fields 
already  preempted  by  other  companies,  although  this  is  not  a 
hard-and-fast  rule. 

It  is  possible  to  avoid,  by  preliminary  work,  any  unnecessary 
investigation  of  countries  whose  markets  offer  no  present  possi- 
biHties  of  successful  introduction  of  the  company's  products. 
There  may  be  a  huge  potential  market  for  motor  cars  in  China, 
but  actually  the  market  is  useless  at  present  because  of  the  lack 
of  roads.  The  same  is  true  of  Japan  where  the  jinricksha  roads 
are  not  wide  enough  to  admit  of  the  passage  of  an  automobile, 
except  in  the  larger  cities. 

There  are  many  further  possibilities  of  the  preHminary  work. 
Study  of  a  commercial  atlas  will  allow  some  conception  of  the 
possible  geographical  extent  of  the  market.  A  map  such  as  is 
illustrated  in  Fig.  46  may  be  of  assistance  in  determining  the 


FOREIGN  MARKETS 


295 


sections  of  a  particular  country  which  afford  the  best  market  for 
the  product.     Certain  products  are  particularly  fitted  for  sale  in 


the  manufacturing  sections  and  certain  other  products  in  the 
agricultural  districts. 

The  preliminary  work  must  be  done  ordinarily  by  means  of 


290  MARKET  ANALYSIS 

bibliographical  study.  Interviewing  will  be  out  of  the  question 
as  far  as  customers  are  concerned,  unless  some  rare  chance  throws 
a  foreign  buyer  in  the  investigator's  path.  Answers  to  letters 
cannot  be  received  in  time  for  preliminary  work.  It  may  be 
possible  to  obtain  help  from  experts,  although  in  many  cases 
their  opinion  will  be  valuable  only  as  regards  a  single  country 
or  group  of  countries. 

Determining  the  Problem.  The  problem  in  the  foreign  field 
may  occur  under  either  one  of  the  following  two  aspects: 

(1)  The  company  already  may  have  established  foreign  con- 
nections, either  direct,  or  through  commission  houses.  It  may 
be  desired  to  conduct  the  survey  on  the  basis  of  what  has  already 
been  done.  In  this  event,  the  problem  becomes  simplified.  The 
surveyor  knows  what  countries  he  must  deal  with,  he  knows  what 
has  already  been  done,  he  has  connections  established  through 
which  to  work,  and  he  can  readily  ascertain  what  is  wrong  with 
present  methods.     He  has  a  groundwork  to  build  upon. 

(2)  The  second  and  harder  case  is  where  the  company  desires 
to  enter  the  foreign  market  for  the  first  time,  never  having  done 
any  exporting  previously.  It  is  not  a  question  of  prosecuting  a 
work  already  commenced,  but  of  initiating  matters.  The  diffi- 
culties ought  not  to  be  minimized,  since  foreign  trade  is  not  sim- 
ple but  highly  specialized. 

In  a  case  such  as  this,  it  amounts  to  finding  a  market  for  the 
product,  involving,  as  it  does,  recommendations  as  to  modifica- 
tions, government  regulations,  shipping  rates,  etc.  However,  it 
may  depend  on  the  company's  reasons  for  wishing  to  enter  the 
foreign  field.  Some  companies  do  so  because  of  a  natural  desire 
and  need  to  expand,  others  do  so  because  they  feel  they  will  find 
a  better  market  abroad  than  at  home;  still  others  do  so  because 
they  are  marketing  a  product  for  which  demand  is  naturally 
limited,  and  they  wish  to  take  advantage  of  whatever  demand 
exists  at  foreign  points  as  well  as  at  home. 

The  Product.  A  product  that  is  eminently  suited  to  domestic 
needs  may  be  absolutely  useless  for  foreign  purposes.  For 
example,  there  is  a  law  in  India,  the  Dutch  East  Indies,  and  in 
New  Zealand  that  motor  cars  shall  have  right-side  drives.  A 
typewriter  with  English  characters  would  be  useless  in  Russia, 
Czecho-Slovakia,  or  Poland.     Even  in  France  or  Spain,  the  type 


FOREIGN  MARKETS  297 

would  have  to  be  modified.  In  every  case  the  investigator  must 
ask  himself:  "  Is  there  anything  to  prevent  the  use  of  this 
product  in  this  country?" 

There  has  been  much  discussion  of  late  years  about  the  desira- 
bility and  even  necessity  of  fitting  the  product  to  the  market,  and 
not  trying  to  force  something  the  public  did  not  want  down  their 
throats.  As  the  government  points  out  in  "  Export  Trade  Sug- 
gestions," the  manufacturer  of  a  plow  must  find  out  the  con- 
dition of  the  soil  in  a  particular  locahty  before  he  attempts  to  sell 
there,  because,  as  everyone  knows,  the  nature  of  the  soil,  and  the 
character  of  the  crops  raised,  determines  the  style  of  the  plow. 
In  this  case,  the  market  should  determine  the  product.  But  in 
South  America,  where  locks  are  so  clumsy  and  keys  so  large  that 
they  have  to  be  jointed  in  the  middle  to  fit  the  pocket,  there 
should  be  a  campaign  to  educate  the  public  in  the  use  of  modern 
locks.  In  other  words,  there  are  limits  beyond  which  it  is 
foohsh  to  carry  the  theory  that  the  public  must  be  satisfied 
at  any  cost. 

In  many  foreign  countries,  the  bayonet  base  is  used,  instead 
of  the  screw  base,  on  electric  lamps.  This  is  a  case  where  it  is 
easier  to  manufacture  bayonet  bases  than  to  change  the  public 
taste.  There  are  other  cases  where  the  climate  may  necessitate 
special  modification  of  the  product.  Electric  fans  for  China  need 
extra  insulation  on  account  of  the  excessive  humidity. 

Color  and  appearance  play  a  great  part,  especially  in  illiterate 
communities.  Goods  are  actually  purchased  by  tiie  color  of  the 
package  or  the  picture  or  trade  mark  on  it.  Such  small  things 
as  this  often  determine  its  success.  Some  goods  and  products, 
for  instance,  have  to  be  altered  for  nearly  every  countiy.  Soap 
is  preferred  black  in  China,  mottled  in  South  America,  yellow 
in  many  places,  and  white  in  New  England. 

In  Chile,  an  automobile  painted  dark  blue  or  black  has  a 
restricted  market.  The  same  is  true  of  China,  where  cars  are 
said  to  be  bought  largely  on  account  of  their  color,  general  appear- 
ance, number  of  accessories,  etc.  A  case  is  cited  where  a  manu- 
facturer furnished  shipments  of  cars,  each  one  painted  a  dif- 
ferent color.  These  cars  were  bargained  for  as  soon  as  they 
arrived.  Bright  green,  light  blue,  various  shades  of  red  or  brown 
seem  to  be  ipost  popular  in  China.     A  car  should  have  mirrors, 


298  MARKET  ANALYSIS 

since  it  is  reported,  somewhat  facetiously,  that  the  Chinese  would 
rather  look  at  themselves  than  the  road. 

The  manufacturer  may  find  some  strange  new  uses  for  his 
product.  In  China,  for  example,  glasses  are  many  times  not 
used  to  aid  vision  but  worn  purely  as  ornament. 

If  the  product  is  a  necessity,  and  required  in  the  home  by 
nearly  everyone,  the  problem  of  successfully  introducing  such 
a  product  in  foreign  markets  is  in  many  cases  remote.  Labor 
generally  is  cheaper  abroad,  and  competition  on  the  same  price 
basis,  taking  into  consideration  freight  rates  and  increased  cost 
of  distribution,  would  be  practically  impossible  unless  carried  on 
on  such  a  scale  as  to  allow  extremely  cheap  production.  Foreign 
countries  are  likely  to  compete  with  us  in  our  own  territory  in 
goods  of  this  nature,  such  as  matches,  china,  toys,  etc.  What 
many  companies  have  done  is  merely  to  establish  a  foreign  sub- 
sidiary to  manufacture  the  product  there  and  merchandise  it  on 
terms  of  equality  with  foreign  competitors.  In  fact,  this  is 
often  the  only  way  in  which  competition  could  successfully 
be  maintained. 

Most  products  which  meet  with  success  abroad  depend  for 
their  popularity  on  their  style,  rarity,  or  novelty.  If  it  is  a  utility, 
it  is  likely  to  be  one  for  which  foreign  producers  have  not  the 
materials,  the  facihties,  or  perhaps  the  secret  of  producing.  The 
question  of  how  many  lines,  styles,  and  sizes  to  ship  abroad  can 
usually  be  determined  only  through  actual  consultation  or  cor- 
respondence with  foreign  dealers.  The  size  of  the  product  is 
very  important  to  consider.  For  sections  of  South  America 
where  open  roadsteads  only  are  available  and  goods  must  be 
lightered  to  shore  and  then  loaded  on  animals,  proper  packing 
according  to  weight  is  essential.  Makers  of  boots  and  shoes  have 
had  to  regulate  the  size  of  their  packages  to  the  carrying  capacity 
of  the  llama. 

The  Company.  The  investigator  wiU  have  less  to  do  with  the 
company  proper  when  it  comes  to  foreign  w^ork.  Here,  as  always, 
it  is  secondary  to  the  product.  But  there  are  some  essential 
qualifications  which  the  company  must  possess.  In  the  first 
place,  it  must  be  able  and  willing  to  produce  the  type  of  product 
needed  abroad.  Further  than  that,  it  must  be  able  to  sell  and 
distribute  through  its   own   sales   channels,  or  be  able  to   pro- 


FOREIGN  MARKETS  299 

cure  elsewhere,  some  other  satisfactory  media  of  sales  and 
distribution. 

The  location  of  the  company  may  have  something  to  do  with 
the  foreign  problem.  For  instance,  a  company  on  the  Pacific 
Coast  is  more  advantageously  situated  for  trade  with  the  Orient, 
and,  conversely,  more  disadvantageously  located  for  trade  with 
Europe,  than  a  company  on  the  Atlantic  seaboard. 

The  credit  situation  of  the  company  is  highly  important. 
It  must  have  money  enough  to  finance  sales  over  a  much  longer 
period  than  is  customary  in  this  countiy.  If  it  is  not  prepared  to 
do  this,  it  cannot  hope  to  compete,  unless  it  puts  its  affairs 
directly  into  the  hands  of  an  exporting  house. 

Too  many  companies  in  the  past  have  adopted  the  position 
that  foreigners  were  insatiably  desirous  of  obtaining  American 
goods,  and  therefore  all  that  was  necessary  was  to  make  the 
goods  and  ship  them  abroad.  It  is  now  generally  recognized 
that  this  is  not  true,  and  that  the  company  must  formulate  its 
foreign  policy  with  the  utmost  care. 

The  Industry  in  General.  What  is  the  situation  in  regard  to 
the  business  abroad?  What  is  the  price  tendency?  What  are  the 
methods  of  distribution?  Is  there  a  trend  towards  concentration? 
Are  methods  of  manufacture  more  advanced  or  more  backward 
than  here? 

Perhaps  there  is  no  industiy  to  compete.  Automobiles  are 
practically  not  manufactured  in  countries  outside  of  the  United 
States  and  Europe.  Specialty  products  may  be  manufactured  in 
this  country  entirely,  as,  for  instance,  those  of  the  Eastman  Kodak 
Company.  This  concern  has  almost  as  strong  a  hold  abroad  as 
it  has  at  home. 

If  there  is  an  industry  of  similar  nature  existent,  it  should  be 
analyzed  as  carefully  as  possible.  Its  prosperity,  its  rate  of 
growth,  both  in  volume  and  value  of  production,  should  be  noted; 
also  the  prices  charged,  the  size  of  the  product,  the  packaging, 
the  number  of  lines  and  styles.  This  information  will  be  diffi- 
cult to  obtain,  particularly  at  such  long  range,  but  much  of  it 
may  be  had  through  the  consular  services,  exporters,  etc. 

Particular  attention  should  be  paid  to  the  question  of  substi- 
tutes, what  strides  they  are  making,  on  what  basis  they  exist, 
whether  cheaper,  better,  etc. 


300  MARKET  ANALYSIS 

Competition.  Methods  of  doing  business  vary  radically  in 
foreign  countries.  So  also  docs  the  character  of  the  competition. 
The  wide-spread  tendency  towards  cooperation  which  has  covered 
this  country  is  lacking  in  many  places  abroad.  Furthermore, 
business  partakes  of  a  more  established  character.  The  age  of  a 
firm  is  a  positive  asset,  reckoned  in  goodwill.  New  firms  are  at  a 
disadvantage,  or  have  been  until  recently.  New  products  may 
take  a  long  time  to  become  established.  These  conditions  are 
true  of  the  old  world  countries,  but  do  not  apply,  of  course,  to 
Australia  and  Canada,  countries  whose  methods  of  business  and 
conception  of  progress  most  resemble  our  own. 

The  bases  of  competition  will  differ  with  each  coimtry.  The 
surveyor  may  find  that  he  will  have  to  divide  the  survey  accord- 
ing to  the  countries  covered.  Price  will  always  be  important  in 
countries  where  the  inhabitants  have,  for  centuries,  been  com- 
pelled to  count  every  penny,  where  wages  are  low,  where  standards 
of  living  are  immeasurably  below  ours,  and  where  bargaining  is 
the  chief  evidence  of  mercantile  efliciency. 

Goodwill  is  an  exceptional  asset  abroad.  Foreigners  ordi- 
narily are  opposed  to  change;  they  will  buy  what  they  have 
always  bought,  and  what  their  fathers  bought  before  them, 
unless  thay  become  disgruntled,  or  unless  some  unusual  mer- 
chandising methods  subvert  them  from  their  allegiance. 

An  American  manufacturer,  shipping  abroad,  must  always 
face  the  possibility  of  his  trade  being  ruined  by  the  estabhshment 
of  home  manufactures  and  the  imposition  of  a  proliibitive  tariff. 
For  example,  there  is  danger  of  our  exports  to  China  of  electric 
lamps  being  superseded  by  lamps  made  in  Shanghai,  where  cheap 
labor  and  proximity  to  the  market  render  competition  difficult. 

In  addition  to  meeting  the  competition  of  foreigners  on  their 
own  ground,  the  company  should  make  allowances  for  compe- 
tition with  other  American  companies  shipping  their  competing 
goods  to  the  same  market. 

Customers.  If  the  company  already  has  estabhshed  connec- 
tions with  foreign  firms,  these  customers  should  prove  to  be  a 
great  source  of  information  as  to  the  proper  policies  to  adopt  in 
regard  to  merchandising  in  foreign  countries.  In  the  majority 
of  cases,  the  foreign  merchant  is  likely  to  give  more  careful  thought 
and  furnish  more  complete  answers  than  the  American  merchant. 


FOREIGN  MARKETS  301 

His  trade  is  established;  he  knows  his  market;  his  market  knows 
him. 

If  the  companj^  has  no  customers,  it  is  part  of  the  surveyor's 
task  to  find  some  prospects.  By  consulting  Kelly's  Directory  of 
Manufacturers  and  IMerchants  of  the  World,  he  can  obtain  a 
list  of  firms  trading  in  any  particular  commodity  in  any  country. 
Also,  through  the  Bureau  of  Foreign  and  Domestic  Commerce, 
he  will  find  in  many  industries  that  the  Bureau  has  on  file  selected 
lists  of  firms  arranged  according  to  countries,  and  also  with  size 
ratings,  and  some  remarks  about  the  kind  of  business  they  do, 
whether  general  or  special,  whether  this  industry  is  a  main  line 
or  whether  they  merchandise  other  goods  at  the  same  time. 

Walter  F.  W^man,  sales  and  export  manager  of  the  Carter's 
Ink  Company,  has  shown  that  foreign  credit  losses  on  branded 
American  merchandise  averaged  from  one-eighth  to  one-quarter 
of  one  per  cent.,  and  average  from  20  to  75  per  cent,  less  than  their 
per  cent,  on  domestic  credit  losses.  This  is  due  to  several  factors. 
In  the  first  place,  shipments  to  foreign  customers  are  ordinarily 
in  larger  quantities.  They  must  be  large  to  be  economical.  The 
producer  takes  few  chances  in  looking  up  the  credit  ratings  on 
such  a  valuable  shipment,  whereas  in  a  domestic  order  he  would 
devote  little  thought  to  looking  up  orders  many  times  smaller. 
Secondly,  he  can  secure  definite  information  as  to  credit  ratings 
from  Dun's,  Bradstreet's,  the  National  Association  of  Manu- 
facturers, the  Philadelphia  Commercial  Museum,  export  journals, 
banks  with  foreign  branches,  etc.  It  is  customary  to  obtain  two 
or  three  separate  reports  on  every  sizable  credit  risk.  If  this 
policy  of  "  Safety  First  "  were  applied  to  the  domestic  credit 
problem,  it  is  safe  to  say  that  the  percentage  of  bad  debts  would 
be  greatly  decreased. 

The  Ultimate  Consumer.  Who  is  going  to  buy  this  product 
among  the  many  millions  of  foreign  prospects?  Is  it  the  European 
lady  of  fashion  or  the  African  native  woman?  Is  it  the  Welsh 
miner  or  the  French  peasant?  The  consumer  problem  is  a  racial 
problem.  Prejudice  and  custom  are  strongly  entrenched  behind 
inherited  methods  of  living.  New  things  are  apt  to  be  regarded 
askance.     Publicity  as  we  know  it  does  not  exist. 

Class  distinction  plays  a  great  part  in  all  foreign  markets. 
The  forms  of  government  arc  generally  more  aristocratic  in  fact, 


302  MARKET  ANALYSIS 

if  not  in  theorv',  while  the  peoples  are  more  divided  by  class  dif- 
ferences, whether  inherited,  acquired  by  money,  or  induced  by 
education.  It  is  the  upper  classes  which  own  the  luxuries,  the 
pianos,  the  automobiles,  and  the  other  ornaments  of  civilization. 
Furthermore,  wealth  is  not  distributed  over  so  large  a  percentage 
of  the  population  as  in  the  United  States. 

All  the  considerations  applied  to  the  domestic  consumer 
should  also  be  apphed  to  the  foreign  consimier.  Particularly  is 
the  subject  of  hteracy  of  importance.  The  percentage  of  those 
who  can  neither  read  nor  write  is  enormous.  This  means  that  a 
large  portion  of  the  population  cannot  be  reached  by  such  pub- 
licity methods  as  we  employ  in  this  country. 

Races  differ  temperamentally  in  their  habits  of  purchasing. 
The  Australian,  for  example,  who  is  ordinarily  supposed  to  resem- 
ble somewhat  the  American,  is  passive  on  the  adoption  of  home 
hfe  conveniences,  but,  once  interested,  does  not  hesitate  for 
financial  reasons.  With  other  nations,  it  is  the  other  way  round. 
They  are  interested,  but  cannot  bring  themselves  to  spend 
money  for  things  without  which  their  fathers  were  perfectly 
content. 

Religion  plays  a  prominent  part  in  some  countries.  Wher- 
ever the  Mohammedan  faith  is  predominant,  and  this  is  true  of 
a  large  part  of  the  world,  animal  fats  must  not  be  used.  It  was 
the  reported  dipping  of  the  army  bullets  in  grease  that  helped 
bring  on  the  great  Indian  IMutiny. 

The  Nature  of  the  Market.  Who  is  going  to  use  this  product 
in  these  foreign  countries?  It  is  the  purchasing  population  which 
matters,  and  in  many  foreign  countries  this  is  but  a  small  fraction 
of  the  total.  The  population  of  China,  for  instance,  is  around 
336,000,000,  3'et  this  does  not  mean  that  the  market  for  goods 
in  China  is  to  that  amount  of  people.  As  a  matter  of  fact,  the 
population  of  China,  which  may  be  reached  by  American  com- 
panies, is  nearer  8,000,000. 

Many  companies  consider  the  urban  population  as  the  standard 
in  computing  foreign  markets,  since  it  is  usually  very  difficult  to 
reach  the  rural  inhabitants.  However,  it  depends  a  great  deal 
on  the  nature  of  the  product,  and  how  it  is  distributed. 

After  determining  the  possible  foreign  users  of  the  product, 
the  surveyor  must  ascertain  how  many  have  money  enough  to 


FOREIGN  MARKETS  303 

buy  it.  Per  capita  wealth  is  far  below  the  standard  of  this  coun- 
try, and  even  in  the  cities  the  purchasing  population  is  less. 

The  surveyor  must  consider  how  transportation  will  affect 
his  problem,  and  whether  the  product  is  of  such  a  nature  that  it 
will  stand  the  long  trip.  In  shipping  to  warm  countries,  packages 
frequently  have  to  be  heraietically  sealed,  or  specially  prepared 
in  some  other  manner. 

Potentialities  and  Limitations  of  the  Foreign  Market.  Poten- 
tial markets  abroad  are  often  very  large  at  the  outset,  but  when  the 
numerous  limiting  factors  have  been  considered,  there  is  fre- 
quently little  actual  market  left.  Potential  and  actual  markets 
in  foreign  countries  are  very  far  apart.  There  is,  for  example,  a 
vast  potential  market  for  electrical  apparatus.  As  the  Eleo- 
trical  World  points  out,  electric  Hghting  in  the  homes  of  the 
old  world  is  in  its  infancy.  Candles,  kerosene,  and  gas  are  used. 
The  new  world,  including  Australia,  New  Zealand,  and  Japan, 
have  quite  generally  adopted  electric  lighting.  A  large  portion 
of  the  population  of  South  America  can  never  be  considered  as 
users.     France  is  years  behind  us. 

Special  local  conditions  may  increase  markets.  For  example, 
New  Zealand,  with  much  water  power,  and  many  hydro-electric 
plants,  uses  electricity  for  cooking,  electric  heaters,  etc.,  in  much 
larger  proportion  than  other  countries.  For  such  useful  facts  as 
this  the  surveyor  should  be  continuously  on  the  lookout.  Approxi- 
mately 7  per  cent,  of  the  Japanese  people  are  users  of  manufactured 
shoes,  yet  the  number  is  increasing  at  a  rapid  rate  due  to  the 
abandonment  of  the  national  costume  in  favor  of  Western  dress. 
This  is  a  case  where  a  small  actual  market  is  rapidly  becoming 
larger  and  a  progressive  manufacturer  of  boots  and  shoes  might 
be  in  a  position  to  take  advantage  of  it. 

Limitations  on  use  must  be  carefully  considered.  They  may 
be  of  every  kind,  geographical,  climatic,  seasonal,  due  to  prejudice, 
price,  etc.  They  may  be  legally  imposed.  Out  of  the  possible 
extent  of  foreign  markets,  a  great  many  are  eliminated  almost 
immediately.  Limitations  may  be  temporaiy,  such  as  adverse 
foreign  exchange,  or  they  may  be  prohibitive,  such  as  a  protective 
tariff, or  they  may  be  permanent, such  as  the  character  of  the  popu- 
lation, standard  of  living,  purchasing  power,  etc. 

Seasonal  hmitations  are  very  important,  coming  as  they  do  at 


304  MARKET  ANALYSIS 

different  intervals.  It  may  be  possible,  however,  for  a  company 
to  take  advantage  of  this  fact,  and  so  coordinate  its  sales  that 
production  here  would  be  constant. 

Even  after  considering  all  factors,  it  may  still  be  hard  to  point 
to  one  country  and  say,  "  This  market  is  satisfactory,"  and  then 
point  to  another  and  say,  "  It  would  be  better  to  avoid  this  one." 

Merchandising  Methods.  The  sales  problem,  in  the  event 
that  the  company'  decides  to  prosecute  the  foreign  market  through 
a  sales  organization  of  its  own,  is  a  very  particular  problem.  In 
the  first  place,  the  salesman  must  speak  the  language  of  the  coun- 
try to  which  he  is  sent,  or  one  that  is  well  understood.  In  the 
second  place,  he  should  be  acquainted  with  the  customs  and  busi- 
ness methods  of  the  country.  He  must  know  his  product.  He 
should  be  capable  of  passing  upon  many  credit  matters  which  it 
would  take  too  long  to  refer  back  to  the  company  at  home.  The 
foreign  salesman  has  a  much  greater  degree  of  responsibility.  He 
is  not  under  such  close  control;   he  is  more  of  a  free  agent. 

What  the  investigator  should  determine  is  whether  the  com- 
pany wiU  find  it  feasible  to  use  its  own  salesman  or  whether  it  must 
rely  on  foreign  agents,  exporters'  agents,  etc.  He  can  obtain  some 
help  in  this  respect  by  observing  the  methods  of  competing  com- 
panies, if  there  are  such,  marketing  to  the  same  field.  He  must 
use  methods  at  least  as  good  as  theirs  if  he  hopes  to  succeed. 

The  same  problems  of  jobber  and  retailer  will  meet  the  manu- 
facturer who  attempts  to  market  abroad,  and  he  must  make  the 
same  decisions  about  methods  of  marketing,  what  terms  he  shall 
grant,  etc.,  etc. 

Methods  of  packing  take  on  great  significance,  as  the  articles 
shipped  must  not  only  stand  a  long  and  difficult  journey,  but 
must  come  out  of  the  casse  finally  in  attractive  shape.  Printed 
matter  on  cartons  should  be  in  the  language  of  the  country  where 
sales  are  to  take  place.  Some  companies  avoid  a  multiplicity  of 
labels  by  printing  directions  in  three  or  four  languages  on  the  same 
carton,  so  that  it  may  serve  for  several  markets. 

One  of  the  salesman's  best  assets  is  an  attractive  sample  case. 
Dealers  abroad  are  said  to  be  sold  on  buying  from  sample  cases. 
They  want  to  see  the  product.  The  display  of  samples  made  up 
for  the  salesman  to  take  with  him  should  be  such  as  to  attract 
favorable  attention.    The  success  of  a  company  abroad  may  be 


FOREIGN  MARKETS  305 

due  to  the  ability  which  it  displays  in  rendering  samples  attract- 
ive. It  is  said  that  one  exporter  of  office  supplies  has  his  display 
cases  designed  by  a  prominent  maker  of  jewelry  boxes,  so  that  the 
product  may  be  displayed  to  the  greatest  advantage. 

As  mentioned  before,  an  attractive  carton  for  the  product  is 
essential  in  selling  the  product  in  many  foreign  countries.  The 
ignorant  populace  judges  by  the  exterior  rather  than  the  interior. 
There  is  a  desire  for  color.  As  each  countiy  is  so  different  in  its 
tastes  and  peculiarities,  nothing  in  this  chapter  should  be  taken  as 
universally  applicable. 

How  is  the  company  going  to  distribute  its  products  abroad? 
The  following  methods  are  ordinarily  used. 

(1)  By  the  company  itself  through  branch  offices  abroad  and  a 
carefully  systematized  foreign  trade  department. 

(2)  Through  manufacturers'  agents. 

(3)  Through  exporters. 

(4)  Other  methods. 

The  second  and  third  have  the  advantage  in  that  they  find  the 
customers,  relieve  the  company  of  the  credit  risk  and  also  the 
necessity  for  carrying  goods  over  a  long  period.  They  have  the 
disadvantages  of  all  middlemen.  It  is  a  question  whether  the 
functions  they  perform  do  not  override  the  disadvantages.  A 
company  that  does  not  market  direct  in  this  country  cannot  very 
well  hope  to  do  so  abroad.  It  depends,  however,  on  the  character 
of  the  product  and  the  character  of  the  market. 

Publicity  methods  are  quite  different.  It  is  not  ordinarily  so 
easy  to  make  the  public  acquainted  with  the  product  through 
the  columns  of  newspapers,  or  magazines,  as  the  public  do  not  read 
the  advertisements,  this  statement  of  course  not  referring  to  many 
English-speaking  countries  of  the  world.  Even  in  France  and 
Germany  and  other  civilized  countries  of  Europe,  there  is  not  the 
same  custom  of  reading  the  paper,  and  more  particularly  reading 
it  for  advertisements.  In  other  words,  consumer  advertising 
abroad  generally  is  not  carried  on  to  any  great  extent.  Such 
advertising  as  is  done  is  done  through  trade  papers  to  the  trade 
or  through  general  publications  with  a  special  view  to  the  trade. 

Methods  of  Securing  Data.  There  are  books  dealing  with 
foreign  trade  in  general,  and  others  dealing  with  foreign  trade  to 
particular  countries  or  in  particular  commodities.     There  are  a 


306  MARKET  ANALYSIS 

dozen  periodicals  on  the  subject.  There  is  much  statistical  infor- 
mation to  be  obtained.  Catalogues  and  pamphlets  may  be  had 
from  foreign  competitors,  either  by  direct  request,  through  cus- 
tomers, or  through  other  sources. 

Statistical.  The  Bureau  of  Statistics  of  the  Department  of 
Commerce  publishes  annual,  quarterly  and  monthly  reports  of 
import  and  export  statistics  of  trade  with  foreign  countries.  The 
value  of  these  trade  statistics  lies  in  determining  what  the  dif- 
ferent countries  already  consume  of  any  given  product,  and  the 
rate  of  growth  of  this  consumption  over  a  period  of  years.  It  is  a 
good  plan  to  compare  the  figures  compiled  by  foreign  govern- 
ments with  those  prepared  by  our  own  Bureau  of  Foreign  and 
Domestic  Commerce. 

Geographical.  An  up-to-date  atlas  and  gazetteer  should  be 
consulted.  The  atlas  will  give  the  location  of  foreign  places, 
principal  ports,  routes,  etc.  The  gazetteer  will  give  the  different 
spellings  of  the  various  foreign  names.  If  business  is  done  with 
India,  a  copy  of  the  Indian  Postoffice  Guide  should  be  secured, 
as  the  names  are  speUed  in  such  varied  ways. 

Directories.  From  directories  the  surveyor  will  get  addresses 
of  finns  and  individuals,  lists,  names  of  importers,  exporters  in 
various  markets,  by  articles,  etc.  In  addition  to  Kelly's  Direc- 
tory of  the  Merchants  and  Manufacturers  of  the  World,  there 
are  the  Didot-Bottin  for  France  and  the  French  colonies,  the 
Deutsches  Reichs-Addressbuch  for  GeiTuany,  and  additional 
directories  of  specific  cities  and  countries. 

Annuals.  These  annuals  contain  official  data  regarding 
government  corporation  taxes,  commercial  laws,  courts,  etc. 
They  are  pubHshed  in  Australia,  Europe,  China,  India,  and 
even  in  such  places  as  the  Dutch  East  Indies,  Grenada,  and 
Jamaica. 

Customs  Tariffs.  The  surveyor  should  always  ascertain  the 
duties  on  goods  imported  into  various  countries,  and  the  other 
customs  regulations  regarding  that  product.  The  International 
Customs  Union,  Brussels,  publishes  this  information  in  English, 
while  KeUy  also  puts  out  a  Customs  Tariffs  of  the  World.  In 
addition,  the  Tariff  division  of  the  Bureau  of  Foreign  and  Domestic 
Commerce  has  compiled  customs  information  relating  to  American 
products  in  foreign  countries. 


FOREIGN  MARKETS  307 

Specific  Infonnation.  This  is  information  relating  to  the 
surveyor's  own  product,  whatever  it  may  be.  He  will  find  classi- 
fied clippings  on  all  subjects  pertaining  to  foreign  affairs  on  file 
at  the  various  offices  of  the  Bureau  of  Foreign  and  Domestic 
Commerce.  These  offices  may,  in  addition,  have  special  mono- 
graphs on  the  subject. 

General.  There  have  been  quantities  of  books  and  pamphlets 
written  on  the  subject  of  exporting,  some  by  government  experts, 
others  by  banks  with  foreign  branches  or  extensive  interests. 
There  are  also  the  various  periodicals  dealing  with  foreign  trade 
which  often  have  extensive  information  available  to  the  surveyor. 
The  various  American  Chambers  of  Commerce  abroad  publish 
pamphlets  dealing  with  the  situation  as  it  affects  American 
products. 

The  questionnaire  ordinarily  must  be  relied  on  for  some  of  the 
first-hand  information.  Obviously,  it  is  seldom  possible  to  give 
such  inducements  to  reply  as  an  enclosed  stamped  envelope,  and 
it  is  difficult  to  offer  anything  in  return  for  the  information  save 
a  possible  business  relation  with  the  company.  The  results  are 
not  perfectly  satisfactory,  yet  questionnaires  can  be  worded  in 
such  a  way  that  where  possible  customers  are  concerned,  the 
percentage  of  repKes  is  fair.  Questionnaires  may  be  sent  with 
good  results  to  American  consuls  in  foreign  cities,  who  often  have 
special  information  at  their  disposal.  There  are  also  business 
bureaus  established  in  the  United  States  by  foreign  countries  to 
promote  trade  relations.  Foreign  consuls  in  this  country  may  be 
of  help. 

All  questionnaires  and  letters  should  either  be  in  the  language 
of  the  country  to  which  they  are  sent,  or  at  least  in  a  language 
which  is  readily  understood.  English,  for  example,  or  German, 
are  both  readily  comprehended  in  Scandinavia,  while  French  is 
understood  in  Russia.  The  language  should  always  be  exceed- 
ingly clear.  It  should  offend  no  racial  prejudice;  it  should  be 
easy  to  answer,  as  brief  as  is  consistent  with  a  thorough  expres- 
sion of  the  facts,  and  courteous.  The  foreigner  particularly 
appreciates  politeness. 

Insufficient  postage  may  be  responsible  for  a  great  deal  of 
unanswered  correspondence.  The  surveyor  should  see  that  every 
letter  sent  abroad  has  its  proper  postage  affixed. 


308  MARKET  ANALYSIS 

Interviews  are  out  of  the  question  unless  it  is  possible  to 
locate  someone  who  is  an  authority  on  trade  and  mercantile 
conditions  in  the  country  under  investigation.  It  is  also  wise  to 
talk  or  correspond  with  exporters  making  a  specialty  of  the  par- 
ticular countiy  or  product.  They  may  have  much  practical 
knowledge  of  value. 

It  is  often  deemed  advisable  to  send  an  investigator  abroad  to 
get  first-hand  information.  It  would  be  fairly  inexpensive  for 
a  company  near  New  York  to  send  a  representative  to  Europe,  and 
the  expense  of  sending  a  man  from  New  York  to  London  would 
not  be  more  than  what  it  would  cost  to  send  him  to  California. 

General  Conclusions.  This  section  on  foreign  markets  is 
merely  a  resume  of  a  subject  which  would  require  many  volumes 
to  do  it  fuU  justice.  It  is  intended  to  show  the  business  man  what 
he  can  learn  through  an  analysis  of  his  foreign  markets,  and  give 
him  some  idea  of  the  scope  of  the  task.  As  foreign  marketing  is 
ordinarily  a  speciaHzed  activity,  any  manufacturer  or  company 
wishing  to  make  a  foreign  survey  should  treat  it  separately.  The 
subject  matter,  although  apparently  the  same,  will  be  widely  dif- 
ferent. The  surveyor  will  be  deahng  with  an  entirely  different 
conception  of  business  principles  and  methods.  He  will  be  deahng 
with  a  different  class  of  consumer,  a  different  standard  of  Hving. 

This  does  not  mean  that  a  foreign  survey  may  not  be  carried 
on  in  connection  with  a  domestic  survey,  but  it  does  mean  that 
the  two  should  be  kept  separate,  and  that  what  appHes  to  the  one 
does  not  apply  to  the  other.  In  fact,  it  is  necessaiy  to  divide  the 
foreign  survey  into  as  many  sections  as  there  are  countries  covered, 
and  the  foreign  survey  becomes  a  collection  of  separate  investi- 
gations. 


CHAPTER  XIX 
APPLYING  THE  MARKET  SURVEY  TO  BUSINESS 

Outline 

Why  may  it  be  difficult  to  convince  the  management  of  the  applicability 
of  conclusions  to  the  business? 

(a)  Opposed  to  innovation. 

(b)  Conclusions  may  seek  to  do  away  with  favorite  policies. 

(c)  Natural  hesitation  to  change  present  methods. 

Why  may  it  not  be  desirable  to  apply  conclusions  immediately? 

(a)  General  business  conditions. 
(6)  Specific  company  problems. 

(1)  Organization. 

(2)  Financial. 

What  are  the  general  apphcations  of  market  analysis? 
(o)  The  better  understanding  of  present  markets. 

(1)  Will  define  the  present  market. 

(2)  Will  show  causes  for  market  fluctuations,  etc. 

(b)  The  disclosure  of  un exploited  markets. 

(1)  Is  it  advisable  to  extend  sales  geographically? 

(c)  The  utilization  of  by-products. 

What  are  some  specific  results  of  market  analysis? 
(a)  To  the  sales  department. 

(1)  As  determining  the  proper  sales  arguments. 

(2)  The  possibility  of  actually  establishing  sales  communications. 

(3)  Information  regarding  the  industry  in  general. 

(4)  Correct  plotting  of  markets  and  division  of  sales  territories. 

(5)  New  sales  channels  through  which  to  sell  product. 
(6)  To  the  advertising  department. 

(1)  Indicates  where,  how,  and  to  whom  advertising  appeal    should 
be  directed. 

(2)  A  guarantee  against  misdirected  advertising, 
(c)    To  the  production  department. 

(1)  Modification  of  the  product  to  meet  market  demand. 
(a)  Technical  improvement  in  product. 

(h)   Improvement  in  appearance  of  product. 

(2)  Discovery  of  new  product  to  manufacture. 

309 


CHAPTER  XIX 
APPLYING  THE   MARKET   SURVEY  TO   BUSINESS 

A  MARKET  analysis  is  not  simply  an  analysis  of  the  market; 
it  is  a  survey  of  the  business  from  one  end  to  the  other.  When  the 
investigation  appears  to  be  going  beyond  its  province  and  enter- 
ing precincts  sacred  to  the  production  or  purchasing  department, 
in  actuality  it  is  not  so.  The  head  of  the  production  department, 
if  he  nods  assent  when  a  market  survey  is  suggested,  under  the 
impression  that  it  will  affect  only  the  sales  department,  should  not 
be  surprised  when  he  finds  that  the  survey  reveals  the  necessity 
for  a  change  in  the  product,  and  consequent  revamping  of  his 
entire  programme.  The  market  cannot  be  divorced  from  the 
other  aspects  of  the  business,  and  necessarily  the  survey  takes 
these  into  consideration.  Did  it  not  do  so,  it  would  fail  in  its 
attempt  to  be  scientific,  since  scientific  methods  presuppose 
thoroughness. 

The  time  to  consider  the  application  of  the  survey  in  terms  of 
results  to  the  company  and  the  business  is  before  the  report  is 
written.  The  surveyor  should  always  bear  in  mind  the  pressing 
needs  of  the  company.  The  preUminary  report  may  have  given 
him  fairly  definite  lines  to  work  upon.  A  searching  analysis  of 
the  data  should  have  crystalhzed  them  into  conclusions.  But 
his  task  is  not  completed  even  then.  He  must  ask  himself, 
"  How  can  the  company  use  these  conclusions?  How  can  it  con- 
vert them  into  dollars  and  cents?  " 

It  is  excellent  policy  to  lay  out  a  plan  of  action  preparatory  to 
handing  on  the  work  to  the  various  departments.  A  planning 
chart  may  be  made  up,  similar  to  the  one  shown  in  Fig.  47,  which 
will  give  an  idea  of  the  various  steps  to  be  taken  before  changes 
can  be  put  into  effect.  Details  such  as  are  brought  forth  in  this 
chart  must  be  worked  out  before  any  tangible  and  profitable 
results  may  be  expected. 

When  is  it  expedient  to  take  up  market  surveys?    When  are 

310 


APPLYING  THE  MARKET  SURVEY  TO  BUSINESS        311 


they  warranted?  These,  obviously,  are  questions  which  should 
be  faced  in  the  beginning;  yet  they  are  never  more  forceful  than 
when  it  becomes  necessary  to  account  for  the  money  expended 
in  conducting  market  research  work. 

Sometimes,  it  must  be  admitted,  it  is  desirable  to  try  a  scheme 
out  by  pure  experiment,  mere  test,  rather  than  to  attempt  a  solu- 
tion of  the  problem  by  analytical  methods.     An  original,  if  some- 


ADMIN15TRATIVE 


Consicfer  arguments  for 
andagainst  manufacture 
of  flexible  disc  drives. 

Defermme  general  policy 
of  procedure  and  fype  of 
dnve  to  be  built 

Get  up  expense  budget^ 
and  make  recommendation 
as  to  appropriation 

ffave  patenf  search  mad'n 
negotiate  witti  holders 
pf patent  rights 

Employ  necessary 
personnel 


INVESTIGATION 


Keep  general  repor  t  up  to  dcrte 

hurdonatcloseuntilall  replies 

are  in 

Make  periodical  progress 

reports 

Send  out  questionnaires  to 

£nglish  Automobile  Journals 

and  to  English  and  French 

Automobile  manufacturers - 

Interview : 

Automotive  Industries. 

Ikitl  Auto.Chamber  of  Commerce 
search  Engineering  Societies 
Libraruparhcvlarly  hreign 
periodical  literature 
Chartarowfh  of  use  of 
flexible  disc  drive 
Study  market  fbrdisc  drive 
outiide automobile  business. 
VJriteSf.y/il'gh'se,  Wagner 
International  Harvester 
Deico,  etc 

Elec  World  and  other  papers 
Rood  making  machy  - 


ENOINEERIN& 


Oetup  specification  sheet 
iv  be  sent  to  carmanufac  - 
turers 

Obtain  andstudy  samples  of 
compeh  five  drives. 
Rig  up  to  make  I  a  bora  tory 
and  road  tests 
Study  patents 
Riview  alt  current  designs 
Analuzeallsuch  designs  in 
light  of  ideal  requirements 
Design  drive 
Bui  Itexpenmental  drive 
Tes  tej^perimentat  drive 
Work  out  requirements  such 
as  best  treatment  of  pro- 
peller tube^etc. 


ESTIMATING 


Qetestimates  onmughparts. 
I  Tube 
2.  Discs 
3  Forgings 
4.  Drop  Forge  Discs 
S.Bolts,etc. 
Figure  mettiod  of  machining: 
l.Opemhons  sequence 
S.  Pouting 

3,  Machine  tools  required 
i.  Timestucfy  estimates 
S  Floor  space 
Tool  equipment- 

Jigs,  fixtures,  set-ups 
Estimate  cost  ofcomplete  drive 
Price  determination 
Comparison  with  competi- 
tive prices  . 
Estimate  number.of drives 
which  mus  t  be  soldm  order 
to  'breakeven  "Firs  tyear 


SALES 


General  plan  of  campaign 

I.  Send  queshonnaire 

2  Send  specification  sheet 

J,  Send  blue  print  of 
proposea  drive 

A  Send  sales  engineer 
Organizing  Sates  - 

Method  of  following  up 

prospects 

Filing  system 

Card  index  -clata 

Chart  showing  componerrt 

used  in  all  cars 
Cooperation  with  rubber  ca's 
Plans  for  replacement  business 
Advertising  ■  ■ 

Obtain  cvmpehtnrs  catalogs. 

Obtain  data  for  sales 

bulletins 
Write  engineering  articles 
tor  trade  papers 


Fig.  47. — Plan  of  Action  after  Completing  Survey. 


what  unethical,  exposition  of  this  method  of  testing  out  a  market 
was  used  by  a  publishing  house,  which  believed  a  certain  series 
of  books  might  be  successful.  They  wished,  however,  to  test  the 
market  before  actually  risking  any  money.  Accordingly,  they 
solicited  subscriptions  for  the  set  of  books.  After  careful  study 
of  resultant  orders,  they  decided  the  venture  was  useless,  sent 
the  money  back  to  those  who  had  already  paid,  and  gave  up  the 
undertaking.  This  was  a  unique  and  effective  short-cut  to  the 
analysis  of  a  market. 


312  MARKET  ANALYSIS 

Before  deciding  to  enter  upon  a  complete  and  possibly  an 
expensive  market  investigation,  the  business  man  may  well 
consider  whether  he  may  not  arrive  at  substantially  the  same 
results  by  some  such  empirical  method. 

Convincing  the  Management.  Strictly  speaking,  the  sur- 
veyor's function  ceases  with  delivery  of  the  report  to  the  execu- 
tives, who  then  should  do  their  own  translating  into  cash.  Too 
frequently,  however,  they  seem  to  have  an  idea  that  all  they  need 
to  do  is  to  endorse  the  report,  as  though  it  were  a  check,  and  con- 
vert it  instanter  into  money.  The  surveyor  should  nip  in  the  bud 
any  such  false  hopes. 

The  final  success  of  the  report,  its  practical  application,  and 
the  beneficial  results  derived  therefrom,  will  depend  much  on  the 
degree  of  cooperation  received  from  the  management  while  it  is 
being  made.  The  market  survey  should  be  regarded  as  vital  to 
the  whole  business,  and  not  an  unimportant  detail.  Unless  the 
executives  have  been  convinced  of  this,  and  have  been  willing  to 
give  it  their  very  careful  thought  and  aid,  it  would  have  been 
better,  perhaps,  never  to  have  started. 

There  are  always  people  opposed  to  innovation,  who  look 
askance  upon  any  break  in  the  customary  routine.  It  is  hard  to 
convince  them.  They  do  not  wish  to  be  convinced.  The  old 
adage  applies  that  "  A  man  convinced  against  his  will,  is  of  the 
same  opinion  still."  Therefore,  it  is  better  to  lead  such  execu- 
tives than  to  drive  them.  Let  them  draw  the  obvious  conclusions, 
and  they  will  think  that  they  themselves  have  made  them. 
Instead  of  saying  in  the  conclusions,  "  The  product  must  be  changed 
thus  and  so,"  it  is  better  to  say,  "  The  demand  of  the  market  seems 
to  be  for  a  product  with  such-and-such  qualifications,  and  a 
product  embodying  these  would  seem  assured  of  success."  In 
other  words,  the  reader  draws  his  own  conclusions,  yet  these 
conclusions  are  perfectly  obvious. 

Sweeping  recommendations  are  almost  certain  to  arouse  some 
antagonism.  In  the  first  place,  they  may  seek  boldly  to  destroy 
a  policy  or  system  installed  by  or  especially  dear  to  someone  in 
the  organization.  In  the  second  place,  they  may  stamp  with 
disapproval  some  practice  others  have  countenanced,  if  not  openly, 
at  least  with  tacit  consent. 

It  is  this  potential  antagonism  which  may  make  it  so  difficult 


APPLYING  THE  MARKET  SURVEY  TO  BUSINESS       313 

to  get  any  action  on  the  results  of  the  report.  It  is  often  a  conflict 
between  conceded  facts  and  personal  predilection  and  belief. 
But  the  market  survey  will  at  least  focus  the  ideas  of  everyone 
upon  many  questions  which  either  had  never  been  raised  before, 
or  had  not  been  given  recent  consideration,  and  the  inevitable 
discussion  is  almost  sure  to  put  the  management  on  its  guard,  if 
not  to  lead  to  constructive  results. 

Changes.  It  is  safe  to  say  the  average  report  will  point  to 
changes  of  one  sort  or  another.  These  may  be  minor  or  major  in 
their  importance,  but,  in  either  case,  the  company  or  individual 
in  whose  hands  lies  the  actual  decision  as  to  whether  these  changes 
are  to  be  made  must  exercise  great  care. 

In  general,  changes  in  business  are  to  be  avoided.  Any  change, 
and  particularly  a  radical  one,  will  necessarily  cause  a  certain 
amount  of  disturbance  and  confusion.  The  most  successful 
businesses  are  those  in  which  veiy  little  surgical  work  is  required. 
But  the  report  is  Hkely  to  point  directly  or  indirectly  to  such 
changes,  and  the  two  points  of  view  must  be  reconciled,  that  of 
the  evidence  shown  in  the  report,  and  that  of  expediency  from  the 
viewpoint  of  the  company  and  general  business  conditions. 

It  stands  to  reason  that  the  man  who  makes  the  market  survey 
will  not  ordinarily  be  in  possession  of  a  knowledge  of  the  vital 
affairs  of  the  company  to  the  same  extent  as  the  executives  them- 
selves, and  consequently,  it  will  not  be  strange  if  he  makes  recom- 
mendations which  cannot  advisedly  be  put  into  immediate  effect. 

Constructive  changes  usually  cost  money.  One  reason,  there- 
fore, why  recommendations  cannot  be  utilized  may  be  lack  of 
funds.  For  example,  it  is  not  unusual  for  the  enthusiastic  market 
surveyor,  pointing  out  the  general  dissatisfaction  in  the  trade 
over  the  distributive  situation,  to  urge  the  elimination  of  jobbers 
and  to  recommend  direct  sales  to  dealers,  combined  with  an  adver- 
tising appropriation,  etc.  Although  this  may  be  an  excellent 
idea,  it  may  be  inadvisable  to  put  it  into  immediate  effect  on 
account  of  the  necessity  for  more  working  capital,  increases  in 
office  force  to  take  care  of  credit,  etc. 

Another  point  is  that  the  average  market  report  seldom  takes 
sufficient  cognizance  of  general  and  fundamental  business  condi- 
tions as  they  exist  at  the  moment.  The  market  surveyor,  unless 
highly  experienced,  is  apt  not  to  have  a  view  of  such  conditions 


314  MARKET  ANALYSIS 

sufficiently  comprehensive  to  enable  him  to  advise  on  them. 
Regardless  of  temporary  commercial  fluctuations,  he  may  find 
the  facts  to  be  thus  and  so,  and  that  a  decisive  course  of  action 
must  be  followed.  Yet,  in  reality,  it  may  not  be  expedient  at 
the  time  to  make  any  changes.  It  may,  on^the  contrary,  be  an 
occasion  for  curtailment. 

Almost  any  trained  man  can  make  a  fair  market  survey  by 
himself,  but  it  often  takes  the  combined  energies  of  many  trained 
minds  to  translate  it  into  profit.  A  market  survey  is  valuable 
or  dangerous  according  to  the  way  in  which  it  is  applied. 

Some  executives,  even  though  recognizing  the  logic  of  the 
conclusions,  are  so  conservative  and  so  cautious  that  they  do  not 
have  courage  to  put  into  effect  schemes  which  the  inquiry  has 
revealed  to  them  as  practicable  and  sound.  Such  men  content 
themselves  with  expressing  admiration  for  the  resourcefulness 
of  the  surveyor  and  for  the  excellence  of  his  report.  But  they 
keep  on  along  the  same  old  track. 

But  a  far  greater  mistake  is  that  made  by  the  over-enthusiastic 
executive  who  is  prompted  to  put  into  effect  all  the  recommenda- 
tions at  once,  without  caution  or  reserve.  Most  market  surveys, 
as  they  are  now  made,  set  forth  certain  clearly  defined  plans  of 
action,  but  they  rarely  propose  workable  means  for  putting  these 
plans  into  effect.  If  any  business  suddenly  adopted  all  the 
recommendations  of  the  ordinary  market  report,  it  might  find 
itself  on  the  road  to  bankruptcy. 

This  does  not  mean  that  changes  are  not  desirable  and  indeed 
constantly  being  effected.  No  business  runs  along  at  a  dead  level 
over  any  length  of  time.  Every  well-conducted  business  is  con- 
stantly changing.  It  is  in  a  state  of  flux.  It  is  expanding  or 
curtailing,  building  or  tearing  down,  progressing  or  retrogressing, 
as  truly  as  if  it  were  an  animal  organism.  Most  sound  men 
believe  in  changes,  though  admitting  the  danger  of  abandoning 
something  which  has  been  tried  and  worked  for  something  which 
is  as  yet  an  unknown  quantity. 

The  General  Results  of  Market  Analysis.  It  is  impossible  to 
predict  the  precise  advantages  to  be  expected  from  an  investiga- 
tion of  any  market  without  being  cognizant  of  the  particular 
conditions  which  surround  it.  In  fact,  a  danger  which  confronts 
everj'  investigator  is  that  of  attempting  to  foretell  what  profits 


APPLYING  THE  MARKET  SURVEY  TO  BUSINESS        315 

may  result  from  his  work.  It  is  almost  as  unscientific  to  state 
in  advance  what  profits  will  accrue  from  a  market  survey  as  it 
would  be  to  predict  the  outcome  of  an  entirely  new  laboratory 
experiment.  Indeed,  conmaercial  research  is  itself,  in  a  sense, 
laboratory  work. 

In  a  general  way,  however,  it  is  possible  to  foreshadow  the 
outcome  of  any  market  study.  There  will  be  certain  definite 
results: 

(1)  The  Better  Understanding  of  Present  Markets.  A  market 
survey  will  almost  surely  define  the  market  already  available. 
Sales  which  have  previously  come  in  for  no  apparent  reason,  other 
than  that  they  have  always  come  in  before,  will  now  be  found 
to  be  the  result  of  certain  well-defined  economic  causes.  The 
survey  should  show  the  motives  for  purchase,  the  tendency  of 
the  market  to  fluctuate,  the  underlying  causes  for  fluctuations, 
and  the  possibility  of  reducing  these  fluctuations  to  a  more  stable 
level. 

As  an  example  of  what  may  be  done  towards  understanding 
the  possibiHties  of  correcting  seasonal  demand  through  an  inten- 
sive study  of  markets,  we  have  the  concerted  action  of  the  lemon 
growers  to  overcome  the  idea  that  lemon  consumption  was  con- 
fined to  the  summer.  The  advertising  campaign  conducted  with 
this  end  in  view  was  successful  in  creating  an  all-year  demand  for 
lemons,  and,  in  this  way,  one  of  the  underlying  causes  for  fluctua- 
tion was  removed. 

Consumers'  views  may  bring  out  valuable  market  information. 
Fig.  48  shows  graphically  a  few  facts  obtained  from  automobile 
owners  as  to  their  hand  tire  pumps.  In  the  first  place,  the  chart 
showed  what  a  large  percentage  of  pumps  had  to  be  replaced  by 
the  purchaser  of  a  car.  Secondly,  it  showed  that  in  spite  of  the 
prevalence  of  free  air  stations,  there  was  still  much  use  for  hand 
pumps.  Thirdly,  it  showed  how  brief  the  life  of  a  pump  was, 
and  fourthly  it  determined  the  average  price  a  customer  was 
wiUing  to  pay  for  a  pump.  In  practical  application,  it  supplied 
the  information  necessary  to  compute  the  size  and  value  of  the 
repeat  market  for  hand  pumps. 

The  survey  will  also  indicate  generally  the  present  trend  of 
market  demand,  and  the  type  of  consumer  to  whom  ilic  appeal 
should  be  made.     Not  only  will  the  case  of  individual  consumers 


316 


MARKET  ANALYSIS 


be  analyzed  in  detail,  but  the  number  of  consumers  will  be  esti- 
mated, their  buying  power  determined,  and  their  geographical 
location  described.  This  information  will  be  of  inestimable  help 
to  any  sales  department. 

2.  Disclosure  of  Unexploited  Markets.     In  addition  to  enu- 
merating, classifying,  and  analyzing  markets  already  served,  a 


VIEWS  OF  CAR  OWNERS  ON  PUMPS                                1 

FORD 

DODGE 

BUICK 

AVERAGE 

Percentage" 
oFowners  who 
find  it  necessary 
fo  replace  pump 
supplied 

73% 

e6°/o 

68  7o 

Number  of  times 
pump  is  used 
pert/ear 

I  I  I  I  I 
33  times 

1  I  I  I  I 
I  I  I  I  I 
I  I  I  1  I 
I  I 

ntimes 

I  I  I  I  I 
I  I  I  I  I 
I  1  I  I  I 

IS  times 

r  I  I  I  I 
I  I  I  I  I 
I  I  I  I  I 
I  I  I  I  I 
I 

21  times 

Estimated  life 
of pump 

^l.lyrs. 

.  2.2 yrs. 

r 

.idyrs. 

.  1.8 yrs. 

Price  owner 
expects  topciL/ 
for  a  replacement 
pump 

^3.90 

^3.8S 

$4.60 

$4. OS 

Fig.  48. — Results  of  a  Market  Survey  Shown  at  a  Glance. 


market  survey  is  likely  to  reveal  new  markets  for  a  company. 
It  is  not  unusual  to  find  that  a  company  is  seeking  its  market 
at  a  distance,  while  neglecting  the  opportunities  at  its  door. 
Sales  departments  often  have  fixed  ideas  on  the  proper  fields 
for  exploitation.  A  market  analysis  should  serve  to  show  whether 
the  plans  of  the  sales  department  dovetail  with  the  actual  con- 
ditions.    It  should  determine  the  advisabiUty  of  extending  sales 


APPLYING  THE  MARKET  SURVEY  TO  BUSINESS        317 

over  wide  geographical  areas,  as  opposed  to  intensive  cultivation 
of  local  markets.  It  will  consider  the  merchandise  in  relation 
to  its  adaptabiUty  for  transportation,  the  logical  methods  of  dis- 
tribution, of  packing,  etc. 

(3)  By-products.  Of  late  years,  the  subject  of  by-products 
has  been  given  much  attention  by  manufacturers,  notably  the 
packers.  The  large  chemical  companies  have  also  devoted  them- 
selves to  the  subject  with  surprising  results.  One  of  the  most 
successful  functions  of  market  analyses  has  been  to  discover 
markets  for  by-products.  An  investigation  was  made  a  short 
time  ago  for  a  marble  company  which  had  for  a  by-product  of  its 
block  and  slab  business  crushed  marble  in  the  form  of  broken 
pieces.  A  market  analysis  was  made  of  this  product.  It  was 
discovered  that  the  "  scrap  "  marble,  when  properly  crushed, 
was  pecuharly  fitted  for  use  in  terrazzo  floors,  that  a  large  demand 
existed  for  it,  and  that  the  market  would  absorb  the  supply  as 
fast  as  produced.  Furthermore,  when  production  was  started, 
it  was  found  that  crushing  the  marble  gave  another  by-product, 
marble  dust.  It  was  ascertained  that  this  marble  dust  could  be 
used  for  fertihzer,  for  soda  water,  for  baking  powder,  for  putty, 
for  rubber,  for  soap,  for  dentrifices,  and  for  a  dozen  other  pur- 
poses. A  market  was  found  for  more  than  the  capacity  of  the 
quarry.  This  brings  out  the  point  of  material  projfit  to  be  obtained 
from  a  survey  of  this  kind.  There  are  few  instances  on  record 
where  the  actual  profit  from  making  the  survey  did  not  exceed 
considerably  its  actual  cost.  Interest  is  aroused  among  customers, 
new  and  old,  which  is  eventually  turned  to  profit  by  the  sales 
department. 

Some  Specific  Results  of  Market  Analysis.  Aside  from  the 
general  results  of  market  analysis,  there  are  so  many  ways  in 
which  the  company  may  be  affected,  that  mention  should  be 
made  of  the  manner  in  which  market  surveys  may  be  applied 
to  the  different  activities  of  the  company. 

Sales.  There  will  be  certain  direct  applications  of  the  survey 
to  the  sales  department.  These  will  be  inevitable,  since  any 
investigation  of  the  market  must  react  on  the  system  by  which 
products  are  brought  to  that  market.  It  will  not  only  serve  to 
reveal  market  possibilities,  but  wiU  also  indicate  the  methods  of 
taking  advantage  of  these  possibilities. 


318  MARKET  ANALYSIS 

One  very  definite  application  of  the  results  of  the  survey  to 
the  sales  department  is  in  the  matter  of  furnishing  sales  arguments 
for  the  product.  The  majority  of  salesmen  tiy  to  sell  their  goods 
through  carefulty  prepared  selling  talks,  which  may  or  may  not 
be  convincing.  They  have  been  coached  by  the  sales  manager 
through  personal  interview  and  sales  bulletins  just  what  the  talk- 
ing points  of  the  product  are.  Fig.  49  shows  the  result  of  a 
tabulation  of  buying  motives  for  washing  machines,  made  by 
the  Idaho  Power  Company.  The  general  opinion  prior  to  this 
survey  had  been  that  most  women  bought  washing  machines  to 
avoid  drudgery,  while,  as  a  matter  of  fact,  30  per  cent,  wanted 
a  washer  because  it  saved  time,  and  25  per  cent,  because  it  did  not 
require  so  much  strength.  This  showed  the  sales  department 
that  their  selling  campaign  had  not  been  carried  on  along  the 
lines  of  least  resistance.  They  had  not  been  selling  the  washers 
by  catering  to  the  motives  for  which  most  women  bought  washing 
machines. 

The  Packard  Motor  Car  Company  of  New  York  calls  market 
analysis  the  steering  gear  of  their  sales  department.  Their 
Transportation  Engineering  department  made  a  complete  series 
of  analyses  covering  their  territory.  According  to  their  Mr. 
Wilham  Elliot: 

"  The  analysis  showed  who  our  chief  competitors  are,  and  their  best 
market,  also  the  percentage  of  business  in  each  territory'  secured  by  them. 
Redistribution  of  territory  has  resulted  from  the  analysis  because  the  absorb- 
ing potentialities  of  each  territory  have  been  clearly  demonstrated. 

"  The  leading  industries  in  each  territory  were  determined.  The  analy- 
sis showed  the  industries  using  the  most  trucks  and  the  trucks  most  used 
by  them.  It  showed  clearly  the  number  of  firms  in  each  territory  operating 
one  truck,  the  number  operating  two  trucks,  the  number  operating  three, 
four,  or  more  trucks.  The  charts  demonstrated  the  lines  of  business  we  were 
strong  in  and  the  lines  we  were  weak  in. 

"  Through  distribution  of  local  registration  cards,  district  analysis  has 
been  made  possible,  resulting  in  a  more  equitable  distribution  of  salesmen's 
territories.  Using  the  registration  cards  as  a  basis,  prospect  files  have  been 
revised,  and  mailing  lists  have  been  brought  up  to  date.  Standards  of  accom- 
plishment have  been  determined.  The  extent  of  competitors'  domination 
has  been  determined.  In  short,  information  has  been  obtained  that  will 
insure  the  maximum  results  for  distribution  activity." 

The  above  results  were  obtained  by  the  use  of  statistics  avail- 
able on  trucks  and  truck  users.     It  is  rarely  possible  to  obtain 


APPLYING  THE  MARKET  SURVEY  TO  BUSINESS       319 


Applying  Survey 

Tabulation  of  Buying  Motives. — (Idaho  Power  Co.) 

I.   Thirty  per  cent,  wanted  a  washer  because  it  saved  time 

1.  For  other  household  duties  while  the  machine  did  the  washing. 

2.  That  they  might  be  better  mothers  to  their  children  and  companions 
to  their  husbands. 

3.  For  recreation  of  all  kinds,  from  playing  the  piano  to  going  to  the 
"movies." 

4.  For  rest. 

5.  For  poUtical  and  social  activities. 

II.  Twenty-five  per  cent,  wanted  a  washer  because  it  saved  strength.  The 
divisions  were  approximately  the  same  as  given  above.  Many 
combined  time  and  strength  arguments  in  one  sentence. 

III.  Fourteen  per  cent,  wanted  a  washing  machine  because  it  saved  health. 

1.  Drudgery  and  getting  overtired  were  eliminated. 

2.  Wet  feet. 

3.  Standing  over  a  steaming  tub  and  going  out  into  the  cold  to  hang 
up  the  clothes. 

IV.  Twelve  per  cent,  wanted  a  washer  because  it  would  preserve  their 
youth  and  beauty. 

The  divisions  were  nearly  the  same  as  given  under  "health,"  but 
emphasis  was  placed  on  the  saving  of  their  hands.  Their  temper  and 
dispositions  were  also  stressed. 

V.   Eight  per  cent,  wanted  a  washer  because  it  was  more  economical. 

1.  Because    it   saved    clothes.     The    destructiveness   of   rubbing   was 
emphasized. 

2.  Washing  could  be  done  oftener,  so  fewer  clothes  were  required. 

3.  Weekly  laundry  bills. 

VI.   Seven  per  cent,  wanted  a  washer  because  it  was  more  sanitary. 

1.  Clothes  were  washed  more  thoroughly. 

2.  Not  mixed  with  other  clothes  at  laundries. 

VII.   Three  per  cent,  wanted  a  washing  machine  because  it  meant  more 
happiness. 

1.  Wash  day  troubles  wore  avoided. 

2.  A  warm  luncli  for  the  children  and  the  husband's  dinner  were  on  time. 

3.  A  general  combination  of  all  time  and  strength  saving  arguments. 

Fio.  49. 


320 


MARKET  ANALYSIS 


such  results  without  resorting  to  a  field  survey.  The  accom- 
panying chart,  Fig.  50,  shows  the  selling  activity  of  tea  in 
Manhattan,  prepared  by  the  New  York  Evening  Journal  from 
actual  interviewing  of  dealers.  The  survey  will  not  only  deter- 
mine the  extent  of  competitors'  business,  but  also  will  ascertain 
why  their  business  is  small  or  great.  It  will  not  only  uncover 
the  psychological  reaction  of  the  consumer  as  to  the  product, 
but  also  that  of  the  retailer  or  jobber.     Thus,  competition  and 


Fig.  50. — Selling  Activity  of  Various  Brands  of  Tea  Charted. 
(New  York  Journal.) 


sales   resistance   are   charted  from  three  viewpoints  with  corre- 
spondingly accurate  results. 

There  is  excellent  possibility  of  sales  being  actually  accom- 
pHshed  through  the  medium  of  communications  estabhshed 
during  the  course  of  the  market  survey.  The  investigator  is 
getting  into  touch  with  so  many  new  people,  many  of  whom  are 
vitally  interested  in  the  subject  under  analysis,  that  if  he  is  prop- 
erly seconded  by  the  sales  department,  business  may  ensue.  The 
surveyor  in  getting  his  information  does  not  have  to  pierce  the 
defensive  armor  which  the  prospective  customer  dons  as  a  guard 
and  protection  against  the  professional  salesman.  He  presents 
his  case  in  a  purely  scientific  fashion.     It  is  surprising  how  much 


APPLYING  THE  MARKET  SURVEY  TO  BUSINESS       321 

interest  Is  aroused  by  this  method  of  presentation.  It  impresses 
the  public  with  a  sense  of  the  company's  efficiency. 

However,  a  word  of  caution  is  necessaiy  here.  Extreme  care 
should  be  taken  not  to  turn  over  any  possible  business  prospects 
to  the  sales  department  without  having  previously  obtained 
the  consent  of  this  prospect.  The  surveyor  should  never  abuse 
his  position  and  his  abihty  to  get  information  under  the  seal  of 
confidence.  The  research  department  can  never  be  synony- 
mous with  the  sales  department,  and  the  functions  of  the  two 
must  be  kept  distinct  and  separate. 

A  market  survey  is  often  applied  to  an  industry  in  general. 
Surveys  are  being  made  for  the  whole  industry  with  a  view  to 
making  the  information  available  to  each  of  the  members  of 
that  industry.  This  is  practically  what  the  government  is  doing 
continuously. 

Many  kinds  of  interesting  results  may  be  obtained  from  the 
application  of  statistics  to  marketing  problems.  Fig.  51  shows 
how  Mr.  Webster,  of  the  George  Batten  Advertising  Agency, 
made  a  map  in  which  the  size  of  each  state  is  made  relative  to  its 
population.  Aside  from  its  pictorial  uniqueness,  it  has  many 
points  of  interest.  Whereas  on  a  regular  map  of  the  United 
States,  with  normal  proportions,  buying  centers  are  bunched, 
on  this  map  buying  centers  are  fairly  evenly  distributed.  The 
surveyor  may  find  it  advantageous  to  formulate  such  a  map 
as  this  in  which  the  areas  of  the  states  are  made  proportional  to 
the  market  index,  whether  it  is  number  of  telephones,  number 
of  homes  owned,  wealth  per  state,  miles  of  roads,  etc.  Such 
maps  as  these  might  prove  exceedingly  valuable  for  sales  purposes. 

Sometimes  an  investigation  will  reveal  valuable  sales  infor- 
mation, existence  of  which  was  never  expected.  A  survey  was 
made  for  a  company  manufacturing  cotton  blankets.  Prior  to 
the  survey,  the  appeal  had  been  based  on  the  theory  that  cotton 
blankets  competed  with  woolen  blankets,  and  it  was  the  pur- 
pose of  the  survey  to  determine  whether  it  were  desirable  to  con- 
tinue in  this  policy  or  to  appeal  to  people  actually  using  cotton 
blankets.  In  one  interview  with  a  single  dealer  the  surveyor 
obtained  more  valuable  information  than  in  all  of  the  rest  of  the 
investigation  put  together.  This  dealer  said  there  were  four 
big  uses  for  cotton  blankets  and  that  none  of  these  was  strictly 


322 


MARKET  ANALYSIS 


APPLYING  THE  MARKET  SURVEY  TO  BUSINESS        323 

in  competition  with  woolen  blankets.  The  big  field  for  cotton 
blankets  was  to  take  the  place  of  sheets.  The  following  cases 
were  cited  where  there  was  a  market  for  cotton  blankets: 

(1)  For  infants. 

(2)  Aged  people. 

(3)  Immigrants  who  did  not  know  what  sheets  were. 

(4)  Wealthy  people  who  used  cotton  blankets  instead  of 
sheets  in  sleeping  porches. 

When  these  results  were  brought  in,  this  interview  was 
inserted  among  the  others  in  the  main  report.  The  surveyor 
attempted  to  get  his  superiors  to  investigate  this  lead  at  greater 
length,  but  they  thought  it  was  not  pertinent.  However,  for 
his  own  satisfaction,  and  because  he  believed  this  dealer  had 
struck  the  root  of  the  matter,  he  wrote  a  separate  report  of  this 
interview,  setting  forth  these  ideas.  Both  reports  were  handed 
to  the  sales  manager,  with  the  remark  that  the  ideas  of  the  isolated 
dealer  might  prove  amusing.  The  sales  manager,  after  reading 
both,  discarded  the  major  report  entirely,  and  presented  the  other 
to  his  directors.  It  was  later  used  as  the  basis  for  a  completely 
renovated  sales  campaign. 

This  was  a  case  where  the  results  of  the  survey  were  radically 
different  from  what  could  possibly  have  been  prognosticated. 
In  this  instance,  the  entire  sales  plan  was  of  necessity  altered, 
to  the  marked  advantage  of  the  company.  The  business  man 
who  insists  that  he  be  shown  in  advance  the  monetaiy  benefits 
of  a  survey  is  perhaps  demanding  too  much.  As  in  the  example 
cited,  the  results  seem  almost  to  be  a  stroke  of  luck,  and  it  must 
indeed  be  admitted  that  market  surveys,  like  other  business 
ventures,  are,  to  some  extent,  a  gamble. 

The  application  of  market  analysis  to  the  sales  department 
is  naturally  most  frequent,  since  it  is  through  this  department 
that  the  market  must  be  reached.  But  the  other  departments 
are  affected  as  well. 

Advertising.  The  same  ammunition  applied  to  the  sales  force 
may  bo  api)li{!d  equally  well  to  the  advertising  department.  But 
in  addition  to  supplying  the  facts,  it  indicates  where,  how,  and  to 
whom  the  advertising  appeal  should  be  directed.  In  fact,  this 
is  one  of  the  most  concrete  results  of  the  average  sin'vcy. 

Advertising  men  are  coming  to  realize  that  the  success  of  the 


324  MARKET  ANALYSIS 

campaign  depends  as  much  on  their  knowledge  of  the  product 
and  the  market  as  it  does  of  their  artistic  methods  of  laying  out 
copy  and  selecting  type  and  illustration. 

The  market  survey  is  a  guarantee  against  misdirected  adver- 
tising. No  one  has  been  quicker  to  see  this  than  the  agencies, 
which  have  taken  this  opportunity  to  protect  themselves  against 
failures  so  costly  to  their  clients  and  injurious  to  their  own 
reputations. 

The  resourceful  surveyor  constantly  is  running  across  oppor- 
tunities that  may  be  turned  to  the  company's  account.  If  he  is 
commercially  minded,  all  will  be  grist  that  comes  to  his  mill. 
In  the  following  case,  The  Chamberlain  Metal  Weather  Strip 
Company  sent  out  a  questionnaire,  asking  what  the  results  of 
weather  stripping  had  been. 

198  said  save  coal. 

195  said  eliminate  drafts. 

138  said  stopped  rattling  of  windows. 

135  said  more  evenly  heated  homes. 

132  said  keep  out  dust. 

65  said  make  windows  slide  easier. 

15  said  keep  out  street  noises. 

12  said  keep  out  rain. 

17  said  eliminate  storm  sash. 

In  this  case,  the  survey  was  beneficially  applied  to  the  busi- 
ness in  two  ways.  First,  information  was  obtained  as  to  the 
exact  requirements  of  users;  second,  the  investigation  itself  was 
used  as  a  means  for  publicity;  that  is,  the  entire  results  of 
it  were  published,  making  a  novel  and  interesting  advertising 
appeal.  This  was  actually  turning  the  results  of  the  survey  into 
immediate  profit. 

There  is  no  question  but  that  market  analj^sis  prevents  mis- 
directed or  inadequate  advertising,  and  in  many  ways  it  is  true  that 
the  results  of  the  anatysis  are  directly  apphcable  to  advertising. 

Production.  Many  market  surveys  indicate  the  desirability 
of  modifying  the  product.  For  example,  in  the  cotton  toweling 
investigation  pre\dously  alluded  to,  the  report  showed  clearly  that 
the  manufacturer  of  cotton  toweling  should  present  his  product 
in  finished  form  rather  than  in  the  piece,  since  by  far  the  larger 
demand  was  for  finished  goods. 


APPLYING  THE  MARKET  SURVEY  TO  BUSINESS        325 

Of  course,  a  manufacturer  who  applies  a  market  survey  to 
his  business  must  weigh  the  dangers  of  changing  his  product 
against  the  dangers  of  not  doing  so.  In  the  ordinary  business, 
after  any  recommendation  for  change  in  the  product  is  made,  it 
will  be  necessary  to  consult  the  engineering  department  and  the 
production  department  to  see  whether  it  is  possible  to  design 
this  new  article,  and  to  produce  it  economically^  in  quantities. 

An  extended  study  of  market  requirements  might  weU 
lead  the  surveyor  to  a  fairly  accurate  description  of  some  new 
product  for  which  there  would  be  great  demand.  Such  sugges- 
tions would  go  to  the  experimental  department.  Although  it 
might  take  months  or  years  to  work  out  a  feasible  plan,  yet  in  the 
end  a  highly  successful  product  might  be  evolved.  In  fact,  this 
is  probably  the  only  sure  and  scientific  way  of  developing  the 
permanently  successful  product. 

One  very  important  function  of  market  analysis  is  that  of 
regulating  production  to  demand.  One  of  the  three  largest 
electrical  companies  found  out  by  means  of  a  survey  made 
through  salesmen  exactly  what  their  customers  would  be  sure 
to  need  for  the  next  year.  From  these  records  a  Ust  of  minimum 
requirements  for  the  business  was  made  up.  It  was  found  that 
so  many  lamps  would  bum  out,  so  many  motors  fail,  etc. 
That  is,  there  would  be  a  certain  amount  of  wear  and  tear,  regard- 
less of  the  state  of  business.  From  this  list  of  requirements  the 
company  could  regulate  its  inventory,  if  not  exactly,  at  least 
with  the  minimum  of  risk.  This  is  a  case  where  production 
actually  was  regulated  by  the  potential  demand. 

By  suiting  productive  capacity  to  market  needs,  the  company 
secures  rapid  turnover,  small  inventory,  quick  profits,  and  an 
extreme  elasticity  in  meeting  situations  before  they  occur.  It 
is  possible  in  this  way  to  guard  against  any  great  loss  through 
sudden  market  lapses. 

Handling  the  Surveyor.  Any  research  department,  particu- 
larly if  newly  instituted,  is  sure  to  make  blunders,  but  even  the 
most  flagrant  mistakes  have  often  been  turned  to  advantage  by 
the  ingenious  executive,  to  whom  such  mistakes  are  always  sug- 
gestive and  stimulating.  It  is,  of  course,  to  be  expected  that 
the  market  surveyor  will  make  some  ill-consick'.red  suggestions, 
^nd  there  is  always  danger  in  accepting  any  of  his  recommenda- 


326  MARKET  ANALYSIS 

tions  at  their  face  value.  The  way  to  get  results  from  a  market 
survey  is  to  be  sure  the  findings  are  sound  before  any  attempt 
is  made  to  apply  them. 

The  trouble  with  many  investigators  is  that  they  are  not 
sufficiently  conservative.  They  become  over-enthusiastic.  They 
have  the  feeling  that  their  contribution,  and  consequently  their 
recompense,  will  be  in  proportion  to  the  number  of  changes  they 
advocate.  A  surveyor  of  this  type  is  like  a  doctor  who  feels 
obliged  to  write  a  prescription  for  the  hypochondriac  in  order 
to  make  him  feel  that  he  has  received  his  money's  worth.  As  a 
matter  of  fact,  the  most  encouraging  investigation  is  that  one 
which  reports  that  no  changes  are  desirable  in  the  company  or 
its  plans.  The  perfectly  well  man  is  beyond  the  reach  of  the 
physician. 

One  way  of  considering  the  matter  of  change  is  to  set  down 
all  the  reasons  pro  and  con,  as  is  done  in  Fig.  52.  Before  adopt- 
ing any  radical  recommendations  of  the  surveyor,  it  is  wise  to 
have  them  submitted  to  some  such  acid  test  as  this. 

Another  matter  in  which  a  small  thing  may  make  a  great 
deal  of  difference  is  in  the  question  of  a  daily  progress  report. 
Sometimes  headway  in  making  a  market  survey  can  be  charted. 

In  any  case,  it  is  highly  desirable  to  have  the  surveyor  give 
an  account  of  himself  at  intervals.  It  is  important  to  keep 
watch  over  him,  particularly  with  regard  to  his  accuracy  and  to 
make  sure  he  is  obtaining  ample  evidence  upon  which  to  base  a 
conclusion,  since  without  such  evidence  his  findings  will  be  of  little 
value.  He  needs  help  and  encouragement,  and  a  steadying  hand 
when  entering  a  proposition  with  which  he  has  had  no  previous 
experience,  just  as  a  child  does  who  is  learning  to  walk.  He  must 
be  kept  watch  over  so  as  not  to  do  damage.  Inexperienced  men 
in  such  an  important  position  can  stir  up  all  sorts  of  trouble,  both 
within  and  without  the  organization. 

Of  course,  in  handhng  men  of  this  sort,  the  only  way  is  to  know 
the  man  himself  thoroughly.  He  must  be  controlled  according 
to  his  abilities  and  shortcomings.  If  he  is  a  man  of  the  sales  type, 
it  is  important  to  impress  him  with  the  necessity  of  absolute 
accuracy  of  statement,  and  with  the  idea  that  his  mission  is  not  to 
put  his  own  words  into  the  mouths  of  the  people  he  is  interview- 
ing, but  to  obtain  their  opinions  and  to  register  facts  impartially. 


APPLYING  THE  MARKET  SURVEY  TO  BUSINESS        327 


Feasibility  of  Mantjfacturing  Flexible  Disc  Drives 


Part 


Part    1 — Arguments   in  favor  of    our  going 
into    the    manufacture    of    disc    drives. 

(1)  We  are  losing  customers  who  are 
going  over  to  the  flexible  disc.  If  we  do  not 
give  them  what  they  want,  somebody  else 
^ill. 

(2)  By  going  into  this  line  we  might  ob- 
tain business  which  we  could  not  expect 
to  obtain  otherwise. 

(3)  We  would  greatly  strengthen  our 
selling  position,  being  able  to  offer  our 
customers  a  complete  line  of  joints. 

(4)  Even  if  the  flexible  disc  proposition 
should  not  pan  out  big  we  should  not  stand 
to  lose  much.  The  tool  expense  is  exceed- 
ingly small,  in  comparison  to  the  great  size 
of  the  possible  market. 

(5)  This  proposition  gives  us  an  oppor- 
tunity to  retrieve  our  good  nan*e  in  the 
automotive  industry.  It  is  perhaps  our 
final  opportunity  to  become  known  again 
as  leaders  in  the  field. 

(6)  If  the  disc  is  to  be  the  eventual  drive, 
and  is  to  supersede  the  metal  drive,  it  is  a 
case  of  get  into  this  line  or  go  out  of  the 
universal  joint  business  altogether.  It  is 
therefore  a  matter  of  importance  to  deter- 
mine whether  or  not  this  development  is 
expected  to  be  of  lasting  importance.  In 
undertaking  such  a  prediction  we  must  take 
into  consideration  the  following  facts: 

(a)  Some  of  the  most  progressive  auto- 
mobile manufacturers,  and  incidentally 
those  making  the  most  money  today,  have 
become  enthusiastic  converts. 

(6)  Those  manufacturers  who  have  in- 
stalled it  in  the  greatest  number  of  cars, 
and  who  have  standardized  it  for  the 
longest  time,  are  the  ones  who  give  it  the 
heartiest  endorsement,  and  say  they  could 
not  be  induced  to  return  to  the  metal  joint. 

(c)  The  largest  rubber  companies,  in 
Bpite  of  financial  enbarrassment  which  has 
caused  the  curtailmtent  of  practically  all 
experimental  work,  are,  after  a  vigorous 
examination  of  the  market,  spending  thou- 
ands  of  dollars  in  developing  flexible  discs. 

(ri)  The  pioneer  rubber  company  in  the 
field  reports  a  yearly  increase  in  business 
of  three  to  four  hundred  per  cent. 

(c)  All  our  competitors,  worthy  of  the 
name,  are  making  feverish  attempts  to  get 
into  the  business,  or  are  in  it  already — to 
say  nothing  of  those  who  devote  themselves 
exclusively  to  the  manufacture  of  flexible 
disc  drivea. 

Fig.  52 


Arguments     against 
this  line. 


going    into 


(1)  There  is  bound  to  be  considerable 
expense  attached  to  this  proposition,  es- 
pecially from  an  engineering  and  produc- 
tion standpoint.  It  is  a  question  whether 
any  such  expenditures  are  warranted  under 
the  stringency  of  present  conditions. 
.  (2)  There  is  not  much  use  in  going  again 
into  a  line  which  anyone  can  go  into.  In 
order  to  protect  our  business,  we  should 
be  obliged  to  buy  up  existing  patents  or 
develop  our  own.  Either  method  would 
entail  expense. 

(3)  The  flexible  joint  is  so  extremely 
simple,  and  requires  so  little  manufacturing 
experience,  that  the  car  manufacturers 
themselves  would  be  likely  to  make  their 
parts  rather  than  buy  them,  and  some  of 
them  are  doing  this  already.  We  should 
have  the  expense  of  carrying  them  through 
the  experimental  stage. 

(4)  The  whole  flexible  disc  proposition 
may  be  merely  a  fad,  after  all,  and  die  a 
natural  death,  like  the  twelve-cylinder 
engine  or  the  cantilever  spring. 

(5)  It  is  better  business  to  stick  to  one 
thing  and  do  it  well  than  to  try  to  do  several. 
We  have  still  much  to  learn  about  building 
universal  joints  of  metal. 

(6)  There  is  a  good  chance  that  flexible 
drives,  if  they  survive  at  all,  will  be  stand- 
ard only  on  cheap  cars.  These  cars  are 
built  on  a  highly  competitive  basis,  and 
would  be  the  very  ones  where  we  would 
stand  at  the  greatest  disadvantage  on 
account  of  freight  rates. 

(7)  With  the  same  amount  of  money 
which  it  would  cost  for  this  experimental 
work,  we  could  complete  some  of  the  other 
experimental  jobs  upon  which  we  have 
already  laid  out  large  sums,  and  have  left 
half-finished. 

(8)  We  are  at  a  big  disadvantage  beside 
people  already  in  the  field,  because  car 
makers  are  not  going  to  give  up  such  drivea 
in  favor  of  ours  unless  we  can  show  them 
a  considerably  better  drive  or  a  consider- 
ably better  price.  Under  prospective  con- 
ditions, we  are  not  in  a  position  to  do  either. 


328  MARKET  ANALYSIS 

On  the  other  hand,  if  the  man  chosen  is  of  the  scientific  or 
engineering  type,  he  should  be  instilled  with  the  necessity  for 
"  selling  the  company,"  or  keeping  his  eyes  open  for  possibilities 
to  promote  sales,  and  to  increase  the  company's  goodwill. 

A  helping  hand  on  the  part  of  the  management  will  do  much 
to  make  up  for  deficiencies  in  the  surveyor's  experience,  and  the 
executive  will  find  that  such  help  will  well  repay  him.  On  the 
other  hand,  it  is  important  not  to  go  so  far  as  to  overawe  the 
sui-veyor  completely  and  to  ecKpse  his  ideas. 

General  Conclusions.  A  business  man  should  look  upon  com- 
mercial research  as  a  thing  which  has  come  to  stay.  It  is  a  fore- 
gone conclusion  that  he  will  not  be  able  to  get  along  without  it,  and 
still  keep  up  with  the  march  of  business  progress.  On  the  other 
hand,  he  should  not  expect  to  obtain  instantaneous  results  from 
research.  This  is  particularly  true  of  the  more  general  market 
surveys.  Studies  of  this  kind  will  be  likely  to  reveal  excellent 
opportunities,  but  these  opportunities  can  best  be  followed  up 
only  after  a  detailed  study  of  such  special  fields.  In  other  words, 
the  general  investigation  is  very  apt  to  have  to  be  followed  up 
by  a  more  particularized  one. 

The  executive  cannot  help  finding  that  market  analysis  work 
is  distinctly  constructive.  Even  the  most  cursory  survey  will 
prove  informative.  If  he  merely  interviews  himself  by  asking 
such  questions  as  those  in  the  outhnes  in  this  book,  he  will  find 
that  the  answers  bring  up  points  vital  to  his  marketing  problem. 

But  the  fundamental  point  to  remember  in  connection  with 
market  research  work  and  its  application  is  that  the  process  must 
be  continuous  if  it  is  to  be  of  permanent  value. 


BIBLIOGRAPHY 

Commercial  Research 

Duncan,  Commercial  Research,  Macmillan,  1920. 

Frederick,  Business  Research  and  Statistics,  Appleton,  1920. 
Sales 

risk,  Retail  Selling,  Harper  &  Bros.,  1916. 

Gerstenberg,  Principles  of  Business,  Prentice,  Hall,  1920. 

Putnam's  Handbook  of  Buying  and  Selling. 

Nystrom,  Economics  of  Retailing,  Ronald,  1920. 
Advertising 

Durstine,   Making  Advertisements  and  Making  Them  Pay,  Scribners, 
1920. 

Curtis  Publishing  Co.,  Selling  Forces,  1913. 

Cherington,  Advertising  as  a  Business  Force,  Doubleday,  Page,  1919. 

Cherington,  The  First  Advertising  Book,  Doubleday,  Page,  1916. 

Blanchard,  Essentials  of  Advertising,  McGraw-Hill,  1921. 

Allen,  Advertising  as  a  Vocation,  McMillan,  1919. 

Sloan  &   Mooney,  Advertising    the   Technical    Product,    McGraw-Hill 
Book  Co.,  1920. 

Adams,  Advertising  and  Its  Mental  Laws,  MacMUlan,  1916. 

Tipper  et  al..  Advertising,  Its  Principles  and  Practice,  Ronald  Press  Co. 
Statistics 

King,  Elements  of  Statistical  Method,  MacMillan,  1920. 

Secrist,  Statistics  in  Business,  McGraw-Hill,  1920. 

Zizek,  Statistical  Averages,  Henry  Holt,  1913. 

Brinton,  Graphic  Methods  for  Presenting  Facts,  Engineering  Magazine 
Co.,  1920. 

Copeland,  Business  Statistics,  Harvard  University  Press,  1917. 
The  CoMPA>nr 

Meyer,  Mercantile  Credits  and  Collections,  MacMillan,  1919. 

Beebe,  Retail  Credits  and  Collections,  Harper,  1919. 

Jones,  Administration  of  Industrial  Enterprises,  Longmans,  Green,  1920. 
Analyzing  the  Problem 

Shaw,  Approach  to  Business  Problems,  Harvard  University  Press,  1920. 
Competition 

Eddy,  The  New  Competition,  McClurg,  1920. 
Distribution 

Shaw,    Some   Problems   in   Market   Distribution,    Harvard   University 
Press,  1915 

Woman's  World,  Guide  to  Profitable  Distribution, 

329 


330  BIBLIOGRAPHY 

Customers 

Sammons,  Editor,  Attracting  and  Holding  Customers,  Shaw,  1919. 

Field,  Retail  Buying,  Harper  &  Bros.,  1917. 
Markets 

Cherington,  Elements  of  Marketing,  MacMillan,  1920. 

Sonnichscn,  Consumers'  Cooperation,  MacMillan,  1919. 

Harris,  Cooperation,  the  Hope  of  the  Consumer,  MacMillan,  1918. 

Copeland,  Marketing  Problems,  Shaw,  1920. 

Duncan,  Marketing,  Its  Problems  and  Methods,  Appleton,  1921. 

Douglas,  Merchandising,  MacMillan,  1918. 


INDEX 


Acknowledging  correspondence,  57 
Advertising  agency,  91,  283 
appeal,  283 

application  of  survey  to,  323 
as  correcting  seasonal  fluctua- 
tions, 247 
character  of,  283 
educational,  281 
effect  on  market  of,  224 
for  developing  new  sales,  282 
national,  197,  199,  284 
need  for  cooperation  in,  285 
policy  of,  285 
protective,  282 
purpose  of,  281 
scope  of,  283 
time  for,  285 
types  of,  280 
value  as  based  on  analysis  of 

markets,  96 
value  in  competition,  178 
value  of,  on  carton,  141 
Age  of  customer,  201 

of  ultimate  consumer,  211 
Agency  advertising,  91,  283 
Aluminum  Castings  Company,  178 
Company  of  America,  177 
foreign    methods    of    manufac- 
ture, 1G8 
American    Telephone    &    Telegraph 

Company,  155 
Analysis,     market.  See    Market 

Analysis. 
,  preliminary,  6,  105 
,  preliminary  foreign,  296 


Answers  to  questionnaires,  51 

,  Categorical,  52 

,  Numerical,  52 

,  Yes  and  No  type,  51 
Arithmetic  Mean,  62 
Assembling  data,  45 

,  methods  of,  46 

,  methods  in  field  survey,  57 
Assistants,  salesmen  as,  88 
Associations,  selling  through,  264 
Authorities,  questionnaires  to,  24 
Average  consumer,  209,  210 

,  weighted,  62 

B 

Bachman,  E.  W.,  232 
Baltimore  News,  212,  248 
Batten  Company,  George,  236,  321 
Beech  Nut  Packing  Company,  137 
Bias,  59 

Bibliographical  work,  17 
done  outside,  18 

,  functions  of,  18 

,  obstacles  to,  18 
BibUography,  value  of,  227 
Books,  for  research  purposes,  17 
Bulk  vs.  packaged  goods,  137 
Brand  name,  184 

as  basis  for  competition,  184 
Bureau    of    Foreign    and    Domestic 

Commerce,  20,  301 
Butterick  Publishing  Company,  215 
Buying  habits,  213 

,  changes  in,  213 
of  farmers,  214 
hours,  214 


331 


332 


INDEX 


Buying  power,  concentration  of,  230 
By-products,  126,  317 


Card  systems,  46 

Cartage,  expense  of,  182 

Carton.     See  package. 

Catalogues  as  sources  of  information, 

20,  175 
Chain  stores,  186 

as  distributors,  267 
Chamberlain    Metal    Weather   Strip 

Company,  324 
Change,  in  business,  313 

in  demand,  224 
Channels  of  distribution,  263,  265 
Characteristics  of   competition,  176 

of  product,  124 
Charts,  bar,  73 

,  distortion  of,  77 

,  organization,  75 

,  planning,  310 
Cheaper  product,  130 
Cherington,  P.  T.,  119 
Chicago  Tribune,  32,  52,  53,  54,  55, 
137,   198,  216,  225,  231,  233, 
242,  246 
Class  of  customer,  216 
Classification  of  answers  to  question- 
naires, 51 

of  markets,  207 

of  motives  for  buying,  194 

of  opinions,  55 

of  products,  119 
Clerical  help,  88 

Climate,  as  market  limitation,  249 
Cobb,  Arthur,  Jr.,  278 
Collections,  company,  150 
Combination,  in  industry,  164 
Commercial     registers,    for    mailing 

lists,  30 
Company,  the,  8 

,  advantage  of  having  research 
department,  85 

,  collections  of,  150 

,  credits  of,  150 

,  customers  of,  192 


Company,  external  opinion  of,  110 

,  finances  of,  150 

,  growth  of,  149 
history,  148 

,  market     research     department 
of,  85 

,  foreign,  298 

,  marketing  function  of,  145 

,  ordeals  of,  151 

,  organization  of,  150 

,  plant  of,  156 

,  problems  of,  146 
records,  149 

,  sales  policy  of,  277 

,  securities  of,  150 

,  technical  work  of,  155 

,  using    name    in    investigation, 
90 
Competition,  bases  of,  178 

,  character  of,  177 

,  cost  of  overcoming,  187 

,  degree  of,  177 

,  effect  on  market  of,  213 

,  foreign,  300 

,  indirect,  186 

,  preUminary  view  of.  111 

,  price  as  affecting,  245 

,  second-hand,  250 

,  sources     of     information     for, 
175 

,  treatment  of,  9 
Competitors,  advertising  of,  285 

,  apparent,  181 

,  location  of,  180 

,  number  of,  182 

,  size  of,  180 

,  transportion  methods  of,  183 
Complaints,  of  customers,  193 
Computing  potential  markets,  253 
Concentration  of  bu\ang  power,  230 

of  industries,  169 

of  manufacture  of  utilities,  121 
Conclusions,  final  compared  with  pre- 
Uminary, 78 

,  general,  78 

,  policy  of,  71 

,  suggestions  obtained  from,  80 


INDEX 


333 


Conferences,  108 

,  preliminary,  109 
Consumer,  age  of,  211 
,  amusements  of,  218 
,  as  a  unit,  208 
,  average,  209,  210 
,  class  of,  211 
,  expert  knowledge  of,  217 
,  foreign,  301 
,  hobbies  of,  218 
,  literacy  of,  218 
,  occupation  of,  215 
,  prejudices  of,  245 
,  questionnaire  to,  28 
,  race  of,  210 
,  religion  of,  211 
,  sex  of,  210 

tests,  98 
,  ultimate,  as  a  group,  224 
,  views  of,  315 
Consumption,  per  capita,  230 
Convenience  goods,  128 
Cooperation,  importance  of,  312 
Correlation  between  industries,  168 
Cost  of  market  analysis,  86 
of  operating  product,  246 
of  overcoming  competition,  187 
Credits  as  affecting  market  problem, 
223 
,  company,  150 
in  distribution,  263 
Cross,  J.  II.,  Advertising  Agency,  167 
Crowell    Publishing   Company,    214, 

253 
Customers,  9 
,  age  of,  201 
as  sources  of  information,  176, 
192 
,  complaints  of,  193 
,  field  survey  of,  193 
,  foreign,  201,  300 
,  former,  202 
,  location  of,  201 
,  neglected,  203 
,  preliminary  view  of,  112 
,  quality  of,  201 
,  suggestions  from,  195 


Customers,  transient,  201 

,  volume  of  business  of,  201 

D 

Data,    analyzing,    interpreting,    and 
presenting,  10 
,  applying,  11 
,  assembling,  45 

,  methods  of  securing  foreign,  305 
,  salesmen  as  collectors  of,  40 
Dealer,  mailing  lists  of,  30 
,  questionnaire  to,  28 
.    See  also  Retailer. 
Deliveries,  quicker,  as  motive  for  buy- 
ing, 197 
Demand,  trend  of,  315 
Dennison   Manufacturing  Company, 

178 
Department,  information,  176 

,  production.      See     Production 

Department. 
,  purchasing.      See     Purchasing 

Department. 
,  sales.     See  Sales    Department, 
stores,  129 
Departmental  sources  of  information, 

107 
Depression,  periods  of,  163 

vs.  prosperity,  251 
Diamond  Match  Company,  121 
Directories,    as    sources    of    mailing 

Hsts,  30 
Disabilities   of   ultimate   consumers, 

212 
Distribution,  chain  store  influence  on, 
267 
,  channels  of,  263 
,  cost  of,  263 
,  credits  as  affecting,  263 
,  definition  of,  259 
,  determining  factors  in,  260 
,  direct,  266 

,  effect  of  market  on,  223 
,  effect  of  product  on,  260 
,  financing  of,  261 
,  foreign,  305 
,  functions  of,  259 


334 


INDEX 


Distribution,  geographical, of  retailers, 
270 

,  indices  of  proper,  266 

,  indirect,  267 

,  mail  order,  268 

,  market,  262 

,  national,  262 

,  new  channels  of,  265 

,  service  as  affecting  problem,  261 

,  through  associations,  264 

,  to  consumers,  223 

,  volume  of  business  as  affecting 
problem,  262 
Douglas  Shoe  Co.,  164 

E 
Eastman  Kodak  Company,  184 
Economic  tendencies,  162 
Editor  and  Publisher,  227,  228,  229 
Electrical  World,  71 
Engineer,  independent  market,  93 

,  industrial,  as  market  analyst,  93 
Envelope,     stamped,    for     question- 
naire, 22 
Equipment,  merchandise  for,  120 

,  office,  89 
Ernst  &  Ernst,  76,  149 
Error,  compensating,  59 

,  cumulative,  59 
Estimates,  60,  99 
Executives,  personality  of,  185 
External  point  of  view,  110 


Farmers,  buying  habits  of,  214 

Fashion.     See  Style. 

Field  survey,  assembling,  57 

of  customers,  193 

of  retailers,  270 
Fihng,  88 
Finance,  company,  150 

,  distributing  function,  260 
Fishing  Gazette,  48,  49 
Ford  automobile,  121,  178,  185,  217 
Foreign  annuals,  306 

competition,  300 

consumers,  301 


Foreign  customers,  211,  300 

customs  tariffs,  306 

distribution,  305 

industries,  168 

information,  geographical,  306 

merchandising  methods,  304 

nature  of  market,  302 
Foreign  market  analysis,  293 

,  company  in,  298 

,  how  made,  293 

,  industry  in  general  in,  299 

,  preliminary,  294 

,  product  in,  296 
Form  letters,  90 

of  report,  70 

G 

General  Motors  Corporation,  184 
Goods,  convenience,  128 

,  shopping,  129 

,  style,  121 

,  utility,  121 

,  utility  and  style,  122 
Goodwill  as  basis  of  competition,  185 
Government  restrictions  on  markets, 

251 
Graphs,  73 

Great  Atlantic  &  Pacific  Tea  Com- 
pany, 164 

H 

Habits,  bujdng,  213 

,  change  in  buying,  213 
Hammermill  Bond  Company,  42 
History  of  the  business,  107 

of  the  company,  148 

of  the  product,  131 
Homes,  ownership  of,  as  market  index, 

233 
Hostihty  to  surveyor,  107 
Hotels,  202 


Idaho  Power  Company,  318 
Illustrating  reports,  71 
Illustrations,   methods  of  reproduc- 
ing, 76 


INDEX 


335 


Income  tax  returns,  as  index,  232 
Independent  market  specialists,  93 
Index  number,  62 
Indianapolis  News,  36 
Indices,  market,  234 

,  as  short  cut,  253 
Industrial  Engineers  as  market  ana- 
lysts, 93 
Industries,  allied,  168 

correlation  between,  168 

concentration  of,  169 

domestic  and  foreign,  168 

localization  of,  169 
Industry,  cotton,  170 

cotton  toweling,  77 

electrical,  254 

information  concerning,  111 

in  general,  8 

foreign,  299 

labor  conditions  in,  171 

match,  165 

motor  truck,  165 

moving  picture,  171 

optical,  212 

patent  medicine,  212 

phonograph,  182 

statistics  of,  161 

textile,  166 

tractor,  247 

value  of  production  in,  162 

volume  of  production  in,  161 

wages  in,  171 
Information  departments,  176 
Integration,  in  industry,  164 
Internal  point  of  view,  106 
Interview,  advantages  of,  36 
,  disadvantages,  37 
,  methods  of  securing,  37 
,  number  required,  36 
Inter\"iewer,  requisites  of,  40 
Invention,  effect  of  revolutionary,  on 
product,  134 


Jobbers  as  a  sales  problem,  277 
as  source  of  mailing  lists,  30 
,  attack  on,  259 


Jobbers,  complaints  against,  269 
,  local,  268 
,  national,  269 
,  opinions  of,  269 
,  questionnaire  to,  28 
,  sectional,  269 


Labor  as  basis  of  competition,  182 

condition  in  industry,  171 
Legislation,  effect  on  market,  223 

,  effect  on  product,  134 
Letters,  form,  90 

,  special,  36 

,  to    accompany     questionnaire, 
34 
Library,  company's,  18 

,  use  of,  17 
Limitations  on  markets  territorially, 
236 

on  use  of  product,  128 
Line  of  goods  as  basis  for  competi 

tion,  181 
Literacy  as  index,  234 

of  consumer,  218 
Little,  Arthur  D.,  136,  162 
Localization  of  industries,  169 
Location  as  basis  for  competition,  180 

of  customers,  197,  201 
LuxTjry,  129 

,  degree  of,  130 

,  market  for,  in  hard  times,  252 

M 
Machinery,  120 

at  plant,  156 
Mailing  lists,  where  obtained,  30 
Mail  order  houses,  186 
as  distributors,  267 
Manufacture,  process  of,  177 
Maps,  75 

Market  analysis,  applying,  the,  310 
as  a  basis  for  advertising,  96 
,  combined  with  other  work,  85 
,  cost  of,  86 
definition,  2 
department  coordinating,  89 


336 


INDEX 


Market  analysis,  department  in  com- 
pany, 85 
,  foreign.     See    Foreign    market 
analysis  from  economic  neces- 
sity, 96 
,  fimctions  of,  3 
preparatory      to      introducing 
goods,  95 
,  preventative,  97 
,  qualifications  for,  87 
,  reasons  for,  55,  95 
,  results  general,  314 
,  results  specific,  317 
,  size  of  department,  87 
,  steps  in  procedure  of,  4 
Markets,  actual,  208 

,  application  of  scientific  meth- 
ods to,  84 
,  classification  of,  207 
,  complexity  of,  222 
,  computing  potential,  252 
,  definition  of,  1 
,  geographic  extent  of,  226 
,  growth  of  company's,  150 
in  distribution,  importance  of, 
262 
,  limitations  on,  244,  303 
,  methods  of  approaching,  238 
,  nature  of  foreign,  302 
,  population  in,  238 
,  potential,  208,  242,  303 
,  problems,  98 
,  related,  237 
,  seasonal,  247 
,  second  hand,  250 
,  sources  of  information,  226 
,  territorial  limitations  of,  236 
,  unexploited,  316 
Materials,  raw,  120 
Mayer  Bros.,  24 
Median,  62 
Merchandise  for  equipment,  120 

for       individual      consumption, 

120 
for  manufacture,  119 
Merchandising,  definition  of,  259 
,  foreign  methods  of,  304 


Merchandising  methods,  98 

services,  92 
Methods  of  approaching  markets,  238 

of  packaging,  141 

of  presenting  statistics,  61 

of  reproducing  illustrations,  76 
Middleman,  the,  259 
Mill,  John  Stuart,  180 
Milwaukee  Journal,  26,  27,  37,  38, 

58,  61,  138,  195,  216,  236,  244 
Mimeograph,  89 
Minneapohs  Tribime,  78 
Mode,  the,  62 
Monopoly,  degree  of,  177 
Motives  for  purchase,  129,  194 

,  advertising  as,  199 

,  better  price  as,  198 

,  better  terms  as,  198 

,  classified,  194 

,  habit  as,  195 

,  location  as,  197 
of  consumers,  209 

,  personal  feeling  as,  196 

,  quality  as,  199 

,  quicker  deliveries  as,  197 
Multigraph,  value  of,  89 


N 

Name,  using  company's,  90 

Nast  Pubhcations,  230,  284 

National  advertising,  as  motive  for 
buying,  197 
Automobile   Chamber   of   Com- 
merce 123,  135 
Cash  Register  Company,  185 

Necessities,  129 

New  Orleans  Item,  211,  230 

Newspapers,    research    activities    of, 
92 

New  York  Evening  Journal,  320 

Notes,  value  of,  108 

Number  of  products  manufactured, 
126 

Numerical  answers  to  questionnaires, 
52 

Nystrom,  Paul  H.,  260,  264 


INDEX 


337 


O 

Occupation  of  consumer,  215 
OflSce  equipment,  99 
Oliver  Typewriter  Company,  265 
Opinions  from  experts,  56 

,  treatment  of,  54 
Organization  chart,  75 

of  company,  150 

of  market  analysis  department, 
85 


Pacific  Ports,  211 

Package,  publicity  value  of,  141 

,  serviceability  of,  140 

,  shape  of,  140 

,  standardization  of,  140 
Packaged  goods,  137 
Packaging,  137 

,  methods  of,  141 

,  standardized,  139 
Packard    Motor    Car    Company    of 

New  York,  318 
ParUn,  Charles  Coolidge,  268,  274 
Patents,  basic,  132 

,  process,  132 

,  value  in  competition,  178,  186 
Per  capita  consumption,  230 
Periodicals,  for  research,  19 

,  research  activities  of,  92 
Personal  equation,  147 

feeling,  as  motive  for  purchase, 
195 
Personality,  of  executive,  185 
Personnel,  152 

Photographs,  use  in  illustrating  re- 
port, 75 
Pierce  Arrow  Motor  Car  Company, 

178 
Planning  chart,  310 

the  campaign,  7 
Plant,  equipment  of  company's,  156 

,  location  of  company's,  156 

,  organization  of  company's,  156 

,  size  of  company's,  156 
Point  of  view,  internal,  106 
,  external,  110 


Policy,  of  advertising,  285 
of  company,  147 
of  conclusions,  77 
of  sales,  277 
Population,  228 
Prediction  in  purchasing  department, 

153 
Prejudice  of  consumer,  245 
,  permanent,  212 
,  temporary,  212 
Prehminary  analysis,  6 
,  foreign,  296 
,  purpose  of,  105 
,  results  of,  105 
conference,  109 
Price  as  a  basis  of  competition,  179 
as  a  limitation,  244 
,  effect  on  packaging,  139 
,  fixed,  179 
,  influence  on  sales  department, 

274 
,   list  as  source  of  information, 
175 
Printers'  Ink,  184,  192,  249 

,  Monthly,  25,  41 
Problem,  determining  the,  5 
,  dividing  the,  100 
,  logical  components  of,  100 
,  major  and  minor,  100 
,  market,  indefinite  character  of, 

99 
of  foreign  analysis,  296 
of  company,  146 
Procedure  of  making  surveys,  4 
Product,  the,  8 
,  cheaper,  130 

,  chemical  properties  of,  124 
,  classification  of,  119 
,  cost  of  oi)crating,  246 
,  danger  of  being  superseded,  133 
,  definition  of,  118 
,  demonstrating,  276 
for  foreign  use,  290 
for  sales  in  different  markets, 
127 
,  general  characteristics  of,  124 
,  history  of,  131 


338 


INDEX 


Product,  ideal,  124 

,  improved,  130 

,  influence   of,    on    distribution, 
260 

,  influence  of,  on  sales  force,  275 

,  intangible,  122 

,  modifying,  324 

,  number  of,  126 

,  packing  of,  137 

,  physical  characteristics  of,  124 

,  reasons  for  existence  of,  130 

,  shortage  of,  130 

,  style  of,  121,  127 

,  substitutes  for,  133 

,  technical  tests  of,  97 

,  type  of,  127 

,  imsuccessful,  151 

,  use  of,  128 

,  utihty,  121 
Production,  regulating,  325 

,  value  of,  162 

,  volume  of,  161 
Production  department,  154 

,  product  poUcy  of,  128 
Professional  etiquette,  123 
Prosperity,  periods  of,  163 

vs.  depression,  151 
Purchasing,  correlated  with  produc- 
tion and  sales,  154 
department,  153 
from  habit,  195 
power,  232 
records,  154 

Q 

QuaHty  as  motive  for  purchase,  199 

of  customers,  201 
Quality  Group,  The,  216,  232,  248 
Quaker  Oats  Company,  140 
Questionnaire,  formulating,  31 

,  functions  of,  21 

,  interest  in,  23 

,  letter  to  accompany,  34 

,  number  necessary,  21 

,  oral,  108 

,  rules  for,  33 

,  special  delivery  stamp,  22 


<_^.^- 


Questionnaire,  stamped  envelope  for 
reply,  22 
,  telegram,  22 
to  authorities,  24 
to  consumers,  28 
to  dealers,  28 
to  jobbers,  28 
to  whom  to  send,  24 
Quicker  deliveries  as  motive  for  pur- 
chase, 195 

R 
Race  of  ultimate  consumer,  210 
Raw  materials,  120,  77 
Recapitulation  sheet,  50 
Records,  company,  149 
Rehgion  of  ultimate  consumer,  211 
Report,  appearance  of,  68 

,  final  success  of,  312 

,  form  of,  70 

,  fundamentals  of,  68 

,  illustrating,  71 

,  outline  for,  66 

,  submitting,  113 

,  writing  the,  66 

,  writing  the  preliminary,  113 
Results,   comparing  of  external  and 

internal  views,  112 
f'Retailer  as  outlet  for  product,  269 

,  completeness  of  stock,  181 

,  field  survey  of,  270 

,  fimction  of,  in  seUing,  278 

,  geographical  location  of,  270, 
181 

,  size  of,  180 

S 
Sale,  imits  of,  138 

,  influence  of,  on  sales  force,  277 
Sales  department,  157 

,  applying  survey  to,  317 
,  emphasis  on  variety  of   prod- 
ucts, 127 
engineering,  benefits  of,  200 
methods,  pecuhar,  279 
policy,  277 
,  repeat,  280 


INDEX 


339 


Sales,  resistance  in  new  markets,  243 

,  success  dependent  on,  274 
Salesmen    as    assistants    in    market 
research,  88 
as  data  collectors,  40 

,  character  of,  274 

,  influence  of  price  on,  274 

,  influence  of  product  on,  275 

,  personality  of,  196,  276 
Seasonal  limitations  on  market,  247 
Second  hand  markets,  250 
Securities,  company,  150 
Sers'ice,  effect  on  distribution,  261 

,  rendered  by  company,  182 
Sex  of  ultimate  consumer,  210 
Shape  of  package,  140 
Shopping  lines,  129 
Shortage  in  supply  of  product,  131 
Size  as  affecting  distribution,  266 

as  basis  of  competition,  180 

of  retailer,  180 

of  unit  order  275 
Sources  of    information,    catalogues, 
20,  175 

,  competitors,  175,  176 

,  customers,  176 

,  departmental,  107 

,  government,  20 

,  interview,  36 

,  library  of  company,  18 

,  market,  226 

,  questionnaire,  20 

,  statistical,  19 

,  trade  papers,  19 
Sources  of  supply,  new,  135 
Special  delivery  stamp  in  question- 
naire, 22 

letters,  36 
Stamped  envelopes,  use  for  question- 
naire, 22 
Statistical  presentation,  61 
Statistics,  foreign,  306 

,  industry,  161 

,  population,  228 
Style  as  market  limitation,  245 

goods,  121 

in  competition,  178 


Style  as  market  limitation  of  product, 

126 
Substitutes  for  product,  133 
Suggestions  of  customers,  195 
Survey,  market,     See  Market  survey. 
Surveyor  as  coordinating  influence, 
155 
,  handling  the,  325 
,  requisites  of,  87 


Tables,  statistical,  75 

Tariffs,  customs,  306 

Technical  work,  in  company,  155 

Telephone  books,  as  sources  for  mail- 
ing Usts,  30 

Tendencies,  economic,  162 

Tendency  of  consumer  to  switch,  195 

Terms,  better,  as  motive  for  purchase, 
199 

Testimonials,  194 

Tests,  customer  and  consumer,  98 
,  technical  of  product,  97 

Time  required  for  survey,  91,  112 

Tractors,    distribution    methods    of, 
264 

Trade    associations    as    sources    for 
mailing  lists,  30 
in  research  work,  19 

Trade  papers  as  sources  for  mailing 
lists,  30 
in  research  work,  19 

Transient  customers,  201 

Transportation  as  basis  of  competi- 
tion, 183 
in  marketing  problem,  212 
means  used  by  competitors,  183 

u 

Units  of  sale,  138 
United  Cigar  Stores,  178,  181 
United  Drug  Company,  165,  259 
United    Shoe    Machinery    Corpora- 
tion, 135,  165 
United  States  Steel  Corporation,  164 
Use  of  product,  128 
Utility  goods,  121 


340 


INDEX 


Value  of  production  in  industry,  162 
Vanity  Fair,  35 
Vogue,  29 

Volume  of  business,  effect  on  distri- 
bution of,  262 

of  customer,  201 

production  in  industry,  161 


w 

Wages  in  industry,  171 
Wealth,  as  market  limitation,  249 
Western  Electric  Company,  254 
Women,  employment  of,   in  market 

analysis,  88 
Writing  the  report,  66,  113 


This  book  is  DUE  on  the  last  date  stamped  below 

NOV  15.       -JANX0«.6 


ciAN  2  1  193f^ 


j  3  1  19At' 


<^VP 


-\5  1935 


APRi 


i-*  V^5^ 


61958 


APR  11 1981 


JAN  4     1931 
OCT  1  2  193tf 


jAf\RaO^S^|      4^^^ 


OCT  3  1 1547 

SEP "?    ^^^  * 
5EC15  19« 


W»     SEP  2  2 1967 
^N^'^VJBRARY  LOAM 

.,jSEP8    1967 


\,<  "W'  \ 


3  l'^^*'      W  icV7<0<M/k 


tfR  7    195^26196? 


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'^J   %      1944  i  NOV  7     195! 


REC'D  LWJRB' 


FlU-iu  L-9-35m-8,'28 


JUN 


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l9530»SCl|«GE.Uin. 


OCT 


I     J981 


3  1158  00528  2628 


AA  'boT'oTs  602  4 


